- If you are currently transferring your pension to an Australian QROPS or KiwiSaver scheme action is immediately required to avoid a 55% tax on the transfer
- If you have already transferred into an Australian QROPS or KiwiSaver you may be stuck permanently
- The industry is in shock following recent QROPS list changes – but they were publicised early
The recent UK legislation changes around pensions freedom have forced a rethink from the HMRC around the rules that govern foreign pension schemes that can accept UK pension transfers (QROPS). This led to an important change being made by the HMRC – the first is a pre-condition for all QROPS that is:
A QROPS must not allow any access to the funds prior to the age of 55
This legislation now means all jurisdictions rules on access to funds are brought in line with the UK rules and has forced major QROPS list changes.
The ramifications of this change are wide spread, as New Zealand KiwiSaver schemes and Australian Superannuation schemes have legislative provisions that allow people to access their funds before the age of 55. In New Zealand, KiwiSaver schemes are full of conditions, that allow access before 55 years old such as first home time buyers, financial hardship, and permanent emigration. In Australia rules allow for access under the provisions of financial hardship. Because these schemes offer these provisions for access they can no longer be QROPS unless their Trust Deeds ring fence UK transferred funds. KiwiSaver trust deeds cannot do this and currently Australian superannuation schemes do not.
These changes have led to QROPS list changes as well with the list now no longer to be able to be relied on as an indicator of a schemes ability to accept UK pension transfers.
Those currently transferring to a KiwiSaver or Australian scheme could be taxed 55% on the transfer
As these schemes no longer meet the conditions for being QROPS any transfer that goes ahead to the schemes after 6 April 2015 will be an unauthorised payment and subject to a 55% tax charge out of the UK. If you are currently transferring your pension to a KiwiSaver or Australian scheme you should immediately halt the transfer.
KiwiSaver members are now locked into the same scheme until they are 65
The implications for someone that has in the past transferred to a KiwiSaver scheme are even more devastating because you will be locked into your scheme until retirement age of 65. The reason for this is because under the KiwiSaver rules you can only transfer your KiwiSaver out to another KiwiSaver and under QROPS rules you can only transfer your QROPS funds to another QROPS. If KiwiSavers no longer meet the QROPS rules then you will not be able to transfer your UK pension funds to any other scheme, therefore locking your entire KiwiSaver pension funds to your current Kiwisaver provider. While this may be good news for the KiwiSaver providers it eliminates all future choice and flexibility for the members of those schemes.
The only feasible way to address this issue is with an urgent change to New Zealand legislation that allows those that have previously transferred their UK pension funds into a KiwiSaver to transfer out, either back to a UK pension scheme or to a Non Kiwisaver QROPS. This will require urgent action on behalf of the New Zealand Government.
If have already or are in the process of transferring your pension to a KiwiSaver scheme or Australian superannuation scheme you should urgently seek financial advice on the implications of the transfer.