QROPS battle added complexity
QROPS advisers in New Zealand say the British Government is likely to want New Zealand to change its KiwiSaver rules, rather than back down itself.
Wednesday, June 17th 2015, 6:00AM
by Susan Edmunds
KiwiSaver providers have lost their QROPS status because they allow members to withdraw savings before the age of 55, in circumstances such as financial hardship.
That means that any money transferred into them from UK pension schemes could now be treated as an unauthorised payment and subject to tax penalties of up to 70%, 55% of which is borne by the saver.
This applies whether they are a migrant or a Kiwi who worked and saved in the UK.
The IRD is awaiting word on whether its negotiations with Her Majesty's Revenue and Customs (HMRC) have been successful.
But Alun Rees-Williams, director of Britannia Financial Services, said he did not expect HMRC to back down.
He said he expected New Zealand would have to introduce ring-fencing for QROPS transfers, for KiwiSaver schemes to qualify.
But that would mean that once savers transferred to a QROPS KiwiSaver scheme, they could not then switch to another non-QROPS provider.
Rees-Williams said the KiwiSaver change seemed intentional but many of the other tax changes introduced on April 6 were having unintended consequences on QROPS schemes.
Savers in defined benefit schemes must now get advice from an adviser with a pension transfer qualification when they want to transfer their savings to a new provider.
Rees-Williams said that meant New Zealand QROPS advisers would have to work with a counterpart in the UK to offer consumers advice on both ends of the transfer. "It's a change to protect consumers there but they had not really thought about how it will apply to offshore schemes. It's another layer of cost for the client."
The biggest change introduced in Britain this year was that savers with defined contribution schemes can now withdraw 100% of their savings when they reach 55 and do not have to purchase an annuity.
But non-European Union schemes do not yet qualify for this pension freedom, after the Government backtracked at the last minute.
They must, for now, continue to require 70% of the transfer value of British pensions to provide an income for life.
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