KiwiSaver schemes lose QROPS status

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IRD is in talks with its counterpart in Britain after moves that have meant New Zealand KiwiSaver schemes can no longer accept British pension transfers without penalty.

Tuesday, May 12th 2015, 6:00AM 2 Comments

by Susan Edmunds

A Qualifying Recognised Overseas Pension Scheme (QROPS) is a scheme that meets requirements set out by Britain’s HM Revenue and Customs (HMRC).

British migrants can transfer their UK pension benefits to the schemes without having to pay an unauthorised payment charge of 55% on the transfer.

Many make the transfer seeking simplicity, wanting to consolidate their retirement savings in one place when they migrate.

A number of KiwiSaver schemes have been operating within the regime but HMRC has sent a letter to schemes on both sides of the Tasman, asking them to confirm that policy-holders can only access their benefits before the age of 55 in the same circumstances as UK pension-holders in Britain can.

The only circumstance that is allowed is ill health.

But in New Zealand, KiwiSaver schemes provide for access to funds in the case of severe hardship, or for withdrawal for a first home.

That means KiwiSaver providers with QROPS status cannot accept UK pension transfers.

The letter was backdated to April 6.

Emma Dale, of law firm Chapman Tripp, said KiwiSaver scheme did not comply with the new rules and would not unless New Zealand or Britain changed their rules.

She said a British move was possible because the KiwiSaver effect seemed to be an unintended consequence. “They were quite happy with these providers until now.”

But she said if it did not, New Zealand could be compelled to change the law to ringfence money that was transferred from Britain.

New Zealand could do that by ringfencing the money transferred from Britain, she said.

“The  QROPS industry in New Zealand is relatively large. If the minister sees the need for a change it is possible.”

People who had already transferred their money into a KiwiSaver schemes should be unaffected, she said.

Tags: IRD QROPS

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