The legislation, the Financial Markets Conduct Bill, states that anyone joining a New Zealand-based pension scheme must be either a resident of the country or employed by the New Zealand government.
The draft, which was published by the recently formed Financial Markets Authority, is open for consultation until 6 September but some commentators are warning that, without amendments, the legislation could effectively end the New Zealand QROPS market.
Stephen Ward, managing director of financial advisory firm and QROPS specialist, Premier Pension Solutions, said he was concerned about this development.
“If this is passed it would effectively end the QROPS market in New Zealand. However, there is a possibility that this is simply a mistake and that the FMA did not intend to include this provision in the legislation,” said Ward.
“I say this because it seems to fly in the face of upcoming legislation to introduce tax free treatment of New Zealand superannuation funds for non-New Zealand residents, which is in the final stages of parliamentary scrutiny and due to be passed into law in the coming weeks.”
However, Ward said that his sources in New Zealand said the Bill is unlikely to be passed into law for at least 12 months and possibly longer, he added before this happened there would be a number of opportunities to have the legislation changed.
Geraint Davies managing director of Montfort International meanwhile, believes the proposed legislation is more than due.
“Hardly a day goes by without an adviser contacting me regarding organisations wandering around Europe touting the cashing in of QROPS," Many Kiwi advisers have also raised concerns about advisers and clients without an NZ connection flogging QROPS cash out strategies. So little wonder New Zealand’s reputational risk was at stake and this draft regulation has been promulgated”.
“QROPS were designed to help those who saw their futures ex-UK plan their retirement in the country they were living in, this did not include creating a market allowing the cashing in a UK pension via a QROPS to either get them out of debt or pay for a holiday. Those advisers who have used NZ as a launderette may have destroyed options for many of those who wished to retire ex-UK and have their benefits stored and managed in a safe haven such as New Zealand."
