On 1 December 2016 the number of New Zealand QROPS reduced dramatically, at that date there were only seven schemes that were open to new members and therefore capable of being QROPS. On the same date there were 31 New Zealand schemes showing on the ROPS list kept by the HMRC. It’s a big difference with serious implications.
Everyone currently transferring needs to check their scheme status – or suffer a 55% tax bill
Everyone transferring their UK pension to New Zealand needs to immediately check the status of the New Zealand scheme that they are transferring to, or potentially be subject to a 55% tax bill on their transfer. The legal advice that we have seen states that where a scheme has closed to new members (these are schemes that have opted for the technically worded “Restricted Legacy Scheme” status) then they can no longer be QROPS. The reason for this is that in order to be a QROPS a scheme must be open to members in the country that it is established. The schemes should have immediately notified the HMRC of the changes in their status and asked to be removed from the list. The major schemes that are effected by this change are:
- Britannia Superannuation Scheme 2012
- Craigs Investment Partners Superannuation Scheme
- Portfolio Superannuation Fund
- Super Trustee Fund
If you are in the middle of transferring to any one of these schemes you should seriously consider halting the transfer immediately. The issue is that if the schemes are removed from the QROPS list (which they should be) effective 1 December and a transfer happens after that date the transfer payment will be considered unauthorised. Any unauthorised transfer will be liable for up to a 55% tax charge from the UK authorities.
The remaining schemes are open for the $500m a year in transfer business
For the seven New Zealand schemes that were open on 1 December and were notified as QROPS there will be a boom a business. With the level of UK pension transfers topping $1.5billion over the last three years and showing no signs of abating the key question will be is their good differentiation between the New Zealand offerings. It certainly appears that there will be.
A number of the remaining schemes are targeted on pension transfers for Australian residents, as they offer a tax free environment for Australian residents. These Australian focused schemes have seen a marked increase in popularity following the removal of Australian QROPS from the list and there being no options for people under the age of 55 in respect of pension transfers to Australia.
The other schemes are mainly managed fund type schemes kind of similar to KiwiSaver Schemes in look and feel (while not being KiwiSavers) and one scheme that is a platform offering similar to the UK self-invested personal pension offerings. So while the market has got smaller there is not a shortage of choice, just a low number of schemes.
The NZ government listened – QROPS withdrawals stay the same
The New Zealand QROPS industry went into bat for the rights of those that transfer their pensions and won. After initially passing draft legislation that curtailed a UK pension transferees ability to withdraw their transferred pension at age 55, the NZ government did a u-turn following strong industry pressure. This means that people that have transferred or do transfer UK pension funds to New Zealand will have the right to access those funds according to the rules set by the UK authorities and not the New Zealand government. This is great news and could pave the way for 100% access at age 55 years old come April 6 next year. Stay tuned on this one.
If you are considering transferring your UK pension or are in the process of transferring it contact us to understand how the above or any other issues effect you.