New QROPS Rules New Zealand

A new draft bill has laid out plans to make pension schemes based in New Zealand only available for residents

London, UK (Pryce Warner International) August 19th, 2011 – The newly created Financial Markets Authority has taken over authorisation of New Zealand pension schemes, and in the newly drafted financial markets conduct bill, they have laid out plans that stipulate New Zealand pension schemes will only be open to New Zealand residents.

Should the bill pass into legislation unchanged, only permanent residents will be able to take out a New Zealand QROPS.

In addition to stipulating that only residents can use a pension scheme, the bill also states that all pensions must be used to provide retirement benefits.

At present New Zealand QROPS are sometimes used by individuals to access 100% of their fund. This is possible because if you are resident for more than five years outside the UK, you can transfer to the New Zealand local rules that allow people to access their full pension fund.

With QROPS in both Hong Kong and Singapore affected by HMRC clampdowns the move is considered a pre-emptive way of protecting New Zealand’s reputation as a jurisdiction for offshore pensions.

However, unless amendments are made this new bill may cause problems for the country's future as a pensions jurisdiction. There needs to be allowances for those that already have QROPS set up as well a way of remaining competitive.

The new bill has also created a contradiction. A law due to come into force in the next few weeks stipulates that non-New Zealand residents will receive tax tree treatment on New Zealand superannuation funds. This is likely to make the country much more attractive for pension investment. However the new FMA proposed bill would hve the opposite effect.

The proposals are presently under discussion and are expected to last until the 6th of September, however analysts have suggested that the bill may not come into effect for at least 12 months.

This is because after the consultation period, the government wants to introduce the bill into parliament before the general election in November. This means only a first reading will be possible. Once parliament reconvenes after the election in January the bill will then undergo further consultation. Finally, there will be several more months’ scrutiny to ensure it meets with current regulations and to allow for transitional allowances.

David Retikin, Director of Operations at Pryce Warner International, a Financial Services Provider for Expats, commented: “There is already an uproar amongst New Zealand QROPS providers, and with good reason. This bill contradicts another about to be passed and also needs additional scrutiny to ensure present QROPS holders are not negatively affected. Though the bill will not become law for some time, it would be wise to consider what other options and QROPS jurisdictions may available to you, should you potentially be affected by the change in New Zealand’s laws.”

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By: Aneil Fatania
Financial Editor
Pryce Warner International Group
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