We always talk about the ongoing importance of knowing what’s happening with your pension scheme and the implications for you of any changes. Last week, Kiwi Wealth Super Scheme, a superannuation scheme recently acquired by Fisher Funds and a QROPS, announced that it was winding up and has removed itself as a QROPS.
We won’t speculate on the reasons for the wind-up, instead we’re looking at the process and whether there are any unintended consequences for members who’ve transferred their pensions.
Closing to new members triggers the removal from QROPS
In announcing that the Kiwi Wealth Super Scheme was being wound it was closed to new members. One of the requirements to be a QROPS is being open to members in the country the scheme is established in. Closed = not open, and therefore the scheme applied to no longer be a QROPS.
As long as ex-QROPS behave there should be no taxes
The rules allow for a QROPS to cease – like the Kiwi Wealth Super Scheme. They need to continue reporting to the HMRC as agreed to when they became a QROPS and as long as no unauthorised payments are made the members won’t get stuck with any large taxes or surcharges. All this process and legislation has all been refined between 2006 and 2017 when schemes were arriving and departing as QROPS (often when the HMRC was removing thousands of schemes at a time).
But is there a wrinkle to the no taxes?
In 2017 the UK came up with the Overseas Transfer Charge, a 25% charge if you transfer your pension to a QROPS in a country that you don’t live in. But the sting in the tail is that if, over the next five full UK tax years, you cease to meet that condition the charge becomes payable. The critical question is whether the condition is violated when Kiwi Wealth delisted as a QROPS and therefore a 25% charge becomes payable for anyone that transferred after 5 April 2018? Time will tell.
The ‘relevant period’ for Kiwi Wealth Super Scheme members
Assuming there’s no OTC and the Kiwi Wealth Super Scheme member transfers to another NZ QROPS it doesn’t mean the five year reporting window disappears. The new scheme will still have to report any payments or transactions until the five year window (since the original transfer from the UK aka the ‘relevant period’) is complete. It creates several layers of administration and confusion for everyone involved and members need to be cautious.
The point is, there are always considerations as pension schemes come and go, rules are revised, legislation shifts and taxes change depending on the government of the day. Keeping across them is hard to do without the support of an expert in the area, which is why we recommend that everyone seeks professional advice around their pensions.
The Kiwi Wealth Super Scheme are providing guidance to their members at the following site https://www.kiwiwealth.co.nz/products/super/windup/