Before 6 April 2015 there were two classes of QROPS in New Zealand KiwiSaver schemes and non-KiwiSaver schemes. From 6 April 2015 the HMRC changed the rules and KiwiSaver schemes can no longer meet the criteria to be QROPS, this means that you can no longer transfer a UK pension into a KiwiSaver scheme.
However, the different types of New Zealand QROPS still offer a significant amount more choice than simply KiwiSaver schemes. Broadly speaking the types of New Zealand QROPS schemes can be sub-classified into three categories:
- Schemes that offer access to investment platforms
- Schemes that offer generic managed funds
- Self administered personal pension schemes
It is important to understand the differences between these types of schemes as well as the differences between the Trust Deeds of the schemes in each category in order to determine which is going to meet your needs best.
What follows is a broad outline of the types of New Zealand QROPS. It is important that you select the right type of scheme for you, thankfully when you deal with us due to our independence we are able to offer access to schemes in all of the categories mentioned below.
Schemes offering access to investment platforms
Some types of New Zealand QROPS sit over the top of investment platforms (such as the AEGIS or JMIS investment platform). These investment platforms allow a wider selection of investment options (they are very similar to UK self invested personal pensions “SIPPs”) and these investment options usually include access to sterling and New Zealand dollar denominated funds. Thus for people that want a higher degree of flexibility in their investment selection these schemes can be fit for purpose.
The trade off for offering a wider selection of funds is that these schemes are not able to match your investment income tax rate (known as the prescribed investor rate “PIR”) with your personal income tax rate. Now this is not an issue if you are high earner, but it could be a disadvantage if you have little income or are not taxed at the highest income tax rate in New Zealand.
Most of these schemes have a minimum amount of money that needs to be transferred before they will allow entry into the scheme. However, due to our long standing relationship with most of these schemes, this is waived for many of our clients.
Schemes offering generic managed funds
Many schemes offer standard managed fund options designed to meet investors risk profiles (which might change over time). These schemes typically offer funds such as cash, conservative, balanced, growth and aggressive. The point of these funds is to make selection simple and build funds that people can easily identify with.
The advantage of these funds are that you can usually set them and let them run rather than necessarily requiring active management. Furthermore, the tax on the investment growth in these funds can usually be matched to your individual income tax rate as they are generally portfolio investment entities (“PIEs”).
We typically find around 60% of all pension transfers end up in a New Zealand QROPS of this type.
Small self-administered schemes
These are similar to the concept of a UK small self administered scheme (SSAS) and allow for the ultimate investment flexibility. But with the investment flexibility comes a considerable amount more administration. New Zealand small self administered schemes require accounts to be prepared, you to act or appoint a trustee and the scheme to be managed in a way that follows the QROPS rules as well as UK investment guidelines. So while they offer the ultimate flexibility you may not invest in residential property, art, wine or any other exotic assets.
These solutions are highly bespoke and have typically only been economic where our clients have transferred in excess of $1million. We recommend that you contact us if you would like to discuss a small self administered scheme might be of benefit to you.
We help our clients through the maze of scheme selection
Reiterating that even within the categories above every scheme is different, some have entry and exit fees, some allow greater benefit flexibility than others, some have differing retirement ages, ongoing management fees are not the same and so in. So selecting the right scheme for you is based on a significant number of variables. That is where our service guides our clients to make decisions that are appropriate for them. This can only be achieved because we are independent from the schemes in New Zealand.