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Transfer market competitive, providers say

New Zealand’s QROPS market has been described as very competitive, after the FMA issued a warning asking providers to rein in their advertising.

Tuesday, December 23rd 2014, 6:00AM

by Susan Edmunds

The FMA warned last week consumers should be cautious of potentially misleading  advertising about transferring UK pension scheme entitlements to New Zealand.

“We are concerned that people are feeling press-ganged into transferring their pension scheme entitlements from the UK and being put under pressure to act now,” said director of compliance Elaine Campbell.

The FMA would not name the providers it was concerned about or give details of the advertisements but Britannia Financial Services took down its ads featuring “financial motivator” Brendon Johnson and altered its website.

FMA spokesman Andrew Park said there were potentially large amounts of money coming through and concern at the ales and advice behaviour happening, he said.

Park said there were also concerns about the extent to which QROPS providers were offering execution-only services with very high fees.

Alun Rees-Williams, of Britannia, said there were valid reasons for some people to feel some urgency about making a move.

From next April, anyone with a UK public sector unfunded final salary pension may no longer be able to transfer their benefits to New Zealand. There are about nine million holders of these pensions, such as people who have worked in teaching, armed forces, the health service and fire service.

“[The British Government] is concerned people will transfer out of unfunded schemes and the exchequer will have to write the cheque, so they will remove the right from next year. There are valid reasons for some people to transfer before next year,” he said.

He said his firm would provide people with the pros and cons of transferring. “If they want advice they can have it if they don’t they don’t necessarily need it.”

With 30 or 40 providers in the market, he said there were competitive issues.

Tax adviser Terry Baucher said there had been a lot of attention paid to the industry over recent years. New Zealand streamlined its tax treatment this year and offered an amnesty to allow those who had already shifted their pensions to declare only 15% of the transfer as income.
“For two successive years people with UK [pensions are being expected to take action and make serious decisions about what they’ll do. It’ll settle down. Sometimes high-pressure sales are in the eye of the beholder,” Baucher said.

John Milner, formerly of Britannia, said he had seen examples of contracts that locked a consumer in to paying a fee to one provider if they transferred within 12 months of signing up with them, even if the transfer was done by someone else.

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