Wrong advice for Australian immigrants
An admission by two major UK public pension schemes that they wrongly advised thousands of immigrating clients has reignited the controversy over advice for immigrants to Australia under British pension (superannuation) schemes.
An admission by two major UK public pension schemes that they wrongly advised thousands of immigrating clients has reignited the controversy over advice for immigrants to Australia under British pension (superannuation) schemes.
The National Health Service Pension Scheme and the Teacher Pension Scheme have said they were unaware of changes to legislation in which they advised migrating members to leave behind an element of their pension within the British system.
However under local taxation laws and Foreign Investment Funds (FIF) rulings, this triggers a capital gains tax liability for many of those choosing to immigrate to Australia.
Montfort International managing director Geraint Davies says the admission still doesn't take into account the cost to those wrongly advised.
"These employer schemes have admitted fault in giving pension advice but how much will this error cost? There are substantial costs involved for immigrants as well as the tax bills, and it is difficult to judge these expenses until each case has been examined," Davies says.
"If immigrants had been given the true facts at the time and made aware of the other options to explore, we believe many different decisions would have been made and avoided, in may cases, a bucket load of tax."
According to Davies, about 500,000 Australians may be liable for unknown tax bill as a result of being linked to pension funds in the UK coming under local capital gains tax laws.
He says more then a million people in Australia where born in the UK with official figures plac-ing British immigration numbers to Australia at 10,000 people per annum.
However, he says the impact of the error is widespread and extends beyond immigrants but also includes those who have left the UK, those who have yet to leave and Australian nationals who have worked in the UK at some time.
Montfort says the extreme nature of the error and costs involved would likely lead to change in legislation while reports from the UK say the giving of wrongful advice has already lead to a number of court cases in that country. However it was unclear if pension holders would receive compensation from the government.
AUTHOR
Jason Spits
Recommended for you
As the government announces a public inquiry into the collapse of Dixon Advisory, risk adviser Richard Silberman has detailed the three areas that typically lead to an AFSL's collapse.
With a growing number of advisers now running their own business, they need to pivot their career identity to being a business owner rather than just as a financial adviser if they want to futureproof their business.
Zenith Investment Partners has launched a range of new managed account portfolios over the past quarter, including on Insignia Financial’s Expand platform.
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
