Thursday, May 12, 2011
Qualifying Recognized Overseas Pension Scheme (QROPS) providers in New Zealand, having come under recent scrutiny by the regulator, are now working together to develop a voluntary code of practice for both product suppliers and advisers. It is hoped that this code will improve the reputation of the market, and comes weeks after Guernsey released its own voluntary code of conduct.
QROPSs are offshore pension arrangements that enable British expatriates to have access to an income abroad, and it is estimated that they have the potential to bring NZD300m (USD238m) of new funds into New Zealand each year.
Competition between suppliers in this lucrative market, however, has led to insufficient checks being undertaken, and so potentially permitting the investor to have access to their funds earlier than permitted by UK regulations. UK Revenue and Customs has shut down a number of QROPS for failing to comply with regulations, and there have been rumours that HMRC was planning to put in place an investigation into the way that New Zealand QROPS were being managed.
David Greenslade, Managing Director of Strategi, a New Zealand-based best practice and compliance consultancy heading this initiative, believes that this voluntary code is a sign of the emerging new professionalism within the industry. “When the wider industry realises there is a potential issue with a sub-sector of products or services, it takes pro-active steps to rectify things without having to wait for the regulator or government to initiate change. This bodes well for the industry in the future,” the firm said.
David Howell, Group Chief Executive of Guardian Wealth Management, noted that the move by the QROPS providers in New Zealand to instigate a code of conduct is welcomed as a way to bring greater stability to the QROPS market in the jurisdiction, ensuring that New Zealand can benefit from being a credible centre for QROPS schemes.
“For those living overseas, it is important that they seek advice from a qualified financial adviser with experience in this field of expertise, and who is regulated to give advice in the jurisdiction. The adviser will undertake the proper pension transfer review to ensure a QROPS is suitable for the individual concerned," Howell said.
“QROPS can deliver considerable advantages for people living permanently overseas, including tax benefits and the ability to pass on the remainder of the pension pot as inheritance. However, there are expenses incurred in transferring a pension to a QROPS and as they can create tax implications for anyone returning to live in the UK, anyone considering a QROPS must ensure they take proper advice on whether it will meet their needs," Howell added.