More changes for overseas pension transfers

New rules are set to mean more changes for people transferring a pension to New Zealand.

Thursday, February 25th 2016, 6:00AM

by Susan Edmunds

Recent changes to British law created upheaval in the QROPS market and deregistered KiwiSaver providers from the scheme.

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.

There were other changes as well, such as the need for advice at both ends of the deal and a restriction stopping public service pension schemes being transferred, including those of people who had worked in the health system – a major contributor to New Zealand's British migrant population.

Now more changes are looming, this time to New Zealand law.

Until now, most British migrants have been able to withdraw 30% of their pensions when they reach 55, in compliance with the British rule of eligibility.

But the Financial Markets Conduct Act will bring into effect new rules from December that restrict that amount to 10%.

That will have an impact on migrants who used the withdrawal to pay their tax obligations relating to the transfer.

The FMCA rule change brings the transferred schemes more in line with KiwiSaver rules, which lock down funds until 65.

Providers can choose to move all their members to the new rules or ringfence those who have already made the transfer, so the old rules still apply.

Alun Rees-Williams, of Britannia, said it was likely most providers would opt for the ring-fencing option.

That would mean only those who transferred their pensions after the rule change would be affected, or those who wanted to move to a new scheme provider.

Rees-Williams said it was another change for pension providers to contend with. “We’ve been doing this since the mid-to-late 90s and there hasn’t been a year without a law change. We’re used to it. It’s just another adaptation we have to make.”

Tags: QROPS