The New Zealand government is proposing restricting use of the country’s pension schemes to residents and those working for the government in a move which could stop its growing Qrops market in its tracks.
Last week, the NZ ministry for economic development published a draft financial markets conduct bill for consultation. As well as the restriction on who can use a pension scheme in the country, it proposes all pensions must be used to provide “retirement benefits”.
HM Revenue and Customs’ Qrops rules state 70 per cent of a fund must be used for retirement income for the first five years of non-residency. After this period, local rules apply.
Monfort International managing director Geraint Davies says the move is a reaction to people using New Zealand schemes to cash out pensions rather than planning for retirement.He says: “After five years resident outside the UK, clients can choose to take local rules and in NZ that allows access to 100 per cent of their fund. The NZ government is acting because HMRC never expected the rule to be used to cash out pensions and it saw a risk to its reputation as an offshore centre.”
Amendments could be made, allowing for genuine use of the schemes but this is a lesson in what the government there wants. Advisers and NZ trust schemes doing this must stop. They are giving ammunition to the legislature and if they do not stop, this will become law.”
The consultation ends on September 6.