Last month, the New Zealand government published a draft of the Financial Markets Conduct Bill. In section 113 of the draft bill, the government set out that, in order for a person to be able to become a participant in a superannuation scheme, and therefore a New Zealand-based QROPS, they would have to be a resident of New Zealand.
It is understood that the government has taken this action to try to eradicate the practice of “pension busting” – whereby a UK pension is transferred overseas in order to release the cash – as it is believed this has been quite prevalent in the jurisdiction.
Michael Reason a barrister working at Super Trustee Fund and co-author of the company’s submission to the New Zealand government, argues the government’s approach the bill takes is too draconian.
“Why should New Zealand cut is throat in order to protect the UK,” asked Reason. “While it is understandable that the government wants to clamp down on pension busting, it does not make sense for it to completely block non-New Zealanders from having a pension in the country.”
In the submission, Reason suggests that the clauses within section 113 which would prevent non-New Zealanders from investing in a pension should be deleted and that instead, members should be forced to adhere “more closely to the existing requirement that the principal purpose of a scheme is for saving for retirement.”
Reason and co-author Gregory Rathbun go on to say that “the QROPS cash out business and the negative publicity it attracts could be dealt with by a clear statement of policy by the Financial Markets Authority to the effect that in general (say) 40% of a member’s fund may be withdrawn prior to financial hardship, ceasing employment or age 55 and that adverse consequences would apply to schemes that did not comply.”
