The FMA has in the last few days published a draft bill for consultation – The Financial Markets Conduct Bill. The draft Bill runs to 400 pages so is quite a hefty read.
Tucked away in a section that relates to New Zealand pension schemes is a provision that NZ pension schemes may only be open to New Zealand residents. This obviously, unless amended (and there is plenty of opportunity for this to happen), is quite a problem for New Zealand as a QROPS jurisdiction in the future.
There are no apparent transitional provisions specifically associated with this provision to deal with existing superannuation schemes where membership is open to any “natural person”, and of course with existing non-New Zealand resident members of New Zealand pension schemes. The preamble to the Bill accepts that there is much work to be done regarding transition generally.
There is the opportunity for the Governor-General by Order in Council to allow transitional relief but this will not suffice if New Zealand is to remain as a QROPS jurisdiction in the longer term.
The proposals, as they stand, fly in the face of the upcoming introduction of tax free treatment of New Zealand superannuation funds for non New Zealand residents, which is in its final stages of parliamentary scrutiny before passing into law in the coming weeks. So we could have a highly attractive jurisdiction for long term pension fund investment which attracts many members into superannuation schemes registered as QROPS whilst on the other hand the draft Financial Markets Conduct Bill will not permit such membership once enacted as it currently stands.
This is clearly a dilemma that the legislators will need to resolve. Perhaps by creating a specific exemption associated with schemes which are, or become, registered as QROPS.
Lobbying to change the draft Bill is already under way. A New Zealand industry source said “there is a general uproar here with these proposals”.
Fortunately there is plenty of time to seek and achieve change.
The timescale that is likely with regard to the Bill is:
- The consultation period lasts until 6 September.
- The Government then wants to introduce the Bill to Parliament before the New Zealand general election at the end of November. This will allow only a first reading of the Bill as time cannot possibly permit more than that.
- The Bill will then be further considered when the newly elected Parliament sits from January 2012.
- The Bill will then be subject to several months of scrutiny, in particular through the committee stage.
- Implementation of the Bill will require subsequent regulations and transitional provisions, which are largely absent in the draft.
Sources in New Zealand do not expect the Bill to pass into law for at least 12 months and probably much longer than that.
We, and others, will be responding to the draft Bill and making representations to the FMA and to ministers at this and every ongoing stage pressing for change so as to enable New Zealand to continue to benefit from its participation in a multi-billion New Zealand dollar QROPS market.
