IRD goes in to bat for QROPS status

New British legislation, which came in at the beginning of April, means any scheme that has qualifying registered overseas pension scheme (QROPS) status must not allow members to make any withdrawals before age 55.

All KiwiSaver schemes were disqualified as QROPS because they allow early withdrawals, such as in cases of financial hardship, when someone buys a first home or emigrates permanently.

Without QROPS status, any transfers to a KiwiSaver scheme could now attract a tax penalty of up to 55%.

Transfers that have already been made are safe.

David Milner, of Britannia Financial Services, said British HM Revenue and Customs (HMRC) had always been concerned about KiwiSaver providers allowing early access to funds.

“It's possible UK authorities will not make changes to current regulations to exclude KiwiSaver schemes from the changes introduced. However, this issue could very quickly be resolved if the Government made changes to the KiwiSaver Act ring-fencing UK pension transfers in the same way that Australian pension transfers are ring-fenced to line up with Australian pension rules. Such a change would need to waive any rights held by KiwiSaver members who transferred prior to these changes being made," he said.

But he said it might not be well received by people who transferred to a KiwiSaver scheme on the assumption that they would be able to make an early withdrawal.

He said he understood that was a benefit that had been promoted by some KiwiSaver providers.