Thousands of Australians who've lived and worked in Britain could now be waiting for decades to transfer their retirement savings into an Australian superannuation account.
Recent changes to the pension system in Britain mean that Australians must now be aged at least 55 - the British preservation age for personal and workplace pensions - to transfer their pension savings to Australia. Previously, they could transfer it at any age.
And even when they reach 55, they probably can't transfer the money into their existing super account because Britain has barred Australia's biggest super funds from accepting transfers.
The tightened requirements from Her Majesty's Revenue and Customs (HMRC) led to about 1600 Australian super funds - including major retail and industry funds - being struck off the list of funds able to receive British transfers. Eligible funds are known as Qualifying Recognised Overseas Pensions Schemes (QROPS).
HMRC's list of Australian funds with QROPS status is now dominated by personal SMSFs - such as the "Boogie Bear Superannuation Fund" and "Bridge Over Troubled Waters Retirement Fund" - that are specially set up to restrict membership to 55 and older.
Just one retail fund, the Australian Expatriate Superannuation Fund, has been added to the list since the 2015 rule change. But its members must also be at least 55 and have a minimum of $100,000 to transfer.
Once people reach 55 (or more if Britain raises the preservation age in the meantime), it's also possible to have the pension paid into an Australian or British bank account, though this may have tax implications.
The change has stopped millions of dollars flowing into the Australian super industry each month. Figures from just one fund, AustralianSuper, show that about 410 members transferred more than $26.5 million in total from British pensions in the six months between February and July 2015.
So how did Australia's biggest funds fall foul of HMRC? The problem relates to different rules over early access and preservation age, says Fiona Galbraith, policy director at the Association of Superannuation Funds of Australia (ASFA).
In an effort to tighten up the multi-jurisdictional regime, HMRC introduced the pension age test, Galbraith says. "This effectively requires the preservation of QROPS money until age 55, with limited exceptions, such as ill health," she says.
But here's the conflict. In addition to ill health, the Australian system can also allow early access for financial hardship and on compassionate grounds. This means Australian funds can't guarantee that members younger than 55 whose accounts include pension money transferred from Britain will only be given early access for ill health reasons.
Despite the ban, Britain's position doesn't suggest that Australia's system is inferior, says David Haynes, senior policy manager at the Australian Institute of Superannuation Trustees. Rather, Australia is "collateral damage" of Britain's "broad brush" approach to address its concerns about more lax regulation around early access in other countries, such as Malta and Gibraltar, which also receive transfers.
Indeed, less than 1 per cent of Australians with super accounts are granted early access, according to ASFA.
What does this mean for the hordes of Aussies who live and work in Britain - or the many British expats who emigrate permanently to Australia? The number of Australians employed in Britain hit a decade high this year, topping 103,000 between January and March, according to the British Office of National Statistics. The average number of Australians employed for the same period in the past 11 years sits at 88,000.
I'm one of the thousands affected and in my case it means keeping track of more than ??30,000 (about $50,000) in a pension on the other side of the world for the next 17 years, until I turn 55. That's what I built up in both employer and personal contributions (and subsequent growth) from time spent working in London between 2007 and 2010. My husband is in a similar boat.
We planned to transfer when we got home and take heed of the industry's call to get our super in one place, pay one set of fees and benefit from compounding interest on the higher combined amount. But we didn't transfer immediately; the Aussie dollar was too strong and Britain was still reeling from the global financial crisis. Turns out, we waited too long.
According to ASFA, in the lead-up to 2015 there were more than 12,000 QROPS accounts in Australia, totalling $1 billion. For individuals, this money means a lot. But it's a small slice of Australia's $2 trillion-plus super industry, says Nick Bond, managing director of British transfer specialists bdhSterling. And he believes political will to revert the situation is waning. "I don't think it's high on the priority list," he says.
While Australian officials ensured that transfers already under way following the rule change were completed, proposals to re-allow transfers for Australians younger than 55 have failed, says a spokesperson for financial services minister Kelly O'Dwyer. "The UK government remains unwilling to accept proposals that would allow Australian funds to regain QROPS status without making fundamental changes to Australia's own legislative regime," the spokesperson said.
In a submission to the HMRC earlier this year, ASFA put forward options for "quarantining" or "ring-fencing" transferred UK money from being paid to an Australian member who has been granted early access for reasons other than ill health. Galbraith says UK draft legislation and policy papers appear to create a concept that could possibly allow this.
One of the nation's biggest super funds, AustralianSuper, also supports this proposal, says its strategic policy advocate Louise du Pre-Alba. "We live in an age where we have a global workforce and increasingly people will work overseas," she says. "It's time to look at ways to make it easier for people to deal with their superannuation or pension money when they work in different countries."
The British Pension Service didn't respond to requests for the number of Australians in a pension scheme. And although many employers do offer them, they won't become mandatory in Britain until 2018. Given this, Australians working there should think about how they manage and contribute to any scheme they enter.
Retirement savings may not be top of mind for younger Australians living abroad. But they do add up. That's the point. On the positive side, my British pension might outperform my Australian fund at times. And Britain's existing preservation age of 55 means I can access it earlier than my Australian super, which could be beneficial. Still, I'd rather the option to get all of my retirement savings together now, in one account and in one country.
How the systems differ
Your "preservation age" is the minimum age for accessing your super.
Australia
Superannuation
Preservation age is 55 for anyone born before July 1960. Those born after July 1,1960, and before July 1964 have preservation ages of 56, 57, 58 or 59. For anyone born after July 1, 1964, it's 60. You also have to meet a "condition of release", most typically retirement.
Age pension
The qualifying age is 65 years and six months. It will increase by six months every two years, to 67 by 2023.
Britain
Personal and workplace pensions
Preservation age is 55 but there are government proposals to raise it to 57 by 2028. You can generally access the money without retiring.
State pension
The minimum pension age is 65 for men and between 60 and 65 for women. However, this age will gradually increase to 68 by 2039.
Note: Australians who have worked in Britain may be eligible. The new British state pension is based on a person's National Insurance (NI) contributions. You usually need at least 10 qualifying years on your NI record to be eligible for a pro-rata payment. However, you can effectively "buy" extra years to fill gaps in contributions for a limited time. The British Pensions in Australia charity can provide more information.
