Most New Zealand QROPS superannuation schemes are in the business of passing on benefits to their members. This extends to foreign exchange rates. Many have negotiated really good deals with banks and get exchange rates a little bit above a wholesale rate. These rates are almost always better than money brokers such as HiFX so members really are getting the best deal.
Not all schemes pass on the benefits – costing the members
We have noted a New Zealand scheme whose Product Disclose Statement states that if they can get a better exchange rate than that shown by the banks in New Zealand they can pocket the difference. This is a real cause for concern because the exchange rates quoted by NZ banks as retail rates are way different to the actual underlying rates and can therefore cost members so a scheme a significant amount of funds – potentially over 5% of their funds.
So take for example this situation:
- A major NZ bank offers a current buy rate for GBP is 1.6485
- The interbank rate is 1.7591
- So for someone transferring 10,000GBP they would get
- $16,485 investing with the New Zealand scheme that does not care about the rate
- $17,592 at the interbank rate
- That is a whopping 6% difference and the member would lose over $1,100 on that transfer
The New Zealand scheme would effectively pocket most of that difference which could be around $800. Make sure that you don’t fall into the trap of paying over the odds on exchange rates. We only deal with schemes that offer extremely competitive exchange rates.