types of NZ qrops
The different types of New Zealand QROPS offer a significant amount of choice and it is not a case of one-size fits all. Broadly speaking there are three types of New Zealand QROPS schemes:
- Schemes that offer generic managed funds – these the vanilla ice cream of schemes
- Schemes that offer access to investment platforms – these are goody goody gum drops of schemes
- Self administered personal pension schemes – these are your own personalised ice-cream sundae of 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.
*note: 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.
Standard managed funds (vanilla ice-cream) schemes
These schemes are by far the largest portion of QROPS in New Zealand, and in the past have attracted the most funds into them. Why, because they make it easy to set and forget for your retirement planning. They have standard managed fund options designed to meet your risk profile (and change with it 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 what’s called portfolio investment entities (“PIEs”).
We typically find around 60% of all pension transfers end up in a New Zealand QROPS of this type.
Investment platform (goody gumdrops ice-cream) schemes
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.
Self managed (personalised sundae) 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.
Here to help you through the maze
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.