Frustrating wait for QROPS providers

A month after “Q-Day”, New Zealand QROPS providers still find themselves in limbo thanks to delays by the UK tax department in processing their applications to be registered under the new rules.

On April 6 tough new rules came into force affecting New Zealand providers of the UK pension transfer scheme, requiring 70% of the amount transferred to be used as “income for life”, meaning only 30% could be immediately withdrawn at the age of eligibility.

This created a headache for New Zealand QROPS providers, due to the near impossibility of changing their trust deeds retrospectively to introduce this requirement.

And it appears the UK authorities are taking their time deciding who is in and who is out under the new regime.

The list of QROPS providerscurrently shows only 24 schemes in New Zealand, well down from about 50 before the changes, and all but three of those now listed are KiwiSaver schemes (which are exempt from the new requirements).

However, according to QROPS adviser David Milner of Britannia Financial Services, there are considerable delays in processing applications for non-KiwiSaver schemes.

“It takes weeks – we’ve had an application in for our new Britannia scheme for six weeks and it still hasn’t been processed,” he said.

One of the three non-KiwiSaver funds is Britannia’s NZ Endeavour Fund; Milner said the difference was it was an existing scheme rather than a new scheme, but it didn’t have any members yet.

But some in the QROPS industry appear to be slow to adapt to the new environment.

“I know one big player that is trying to amend its prospectus and trust deed but in my opinion they won’t get away with it.  The only way you can effectively do it is to close the existing scheme to new transfers and open up a new one that is compliant,” he said.

“The list comes up twice a month – there’ll either be more people on the list or there won’t be.”

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