Uncertainty about QROPS New Zealand
The New Zealand QROPS gravy train may be about to hit the buffers for retirement savers who contrive to strip their pensions of cash by exploiting a legal loophole.
New Zealand QROPS are shrouded in uncertainty after the govt has declared ambitions to modify pension law to stop the questionable money grabbing.
Current QROPS laws have a loophole for pension backers who can prove they have been UK non-resident for no less than 5 years.
The rules say that up to the 5 year limit, offshore QROPS directors have to report any withdrawals from the fund to HM Cash and Customs.
After the five years are up, accountability for the QROPS reverts to the finance regulator in the country where the pension is based.
New Zealand rules let retirement savers cash in their savings, so many advisers send their ex pat clients to New Zealand for their offshore pension.
NZ QROPS speculators can live anywhere in the world – it's just their pension that needs to be based in New Zealand.
After sitting out the five-year ex pat rule, they can withdraw their cash from the pension, disregarding ordinary UK pension rules, like waiting to aged 55 years old or limiting tax free cash withdrawals to 25 or 30 per cent of the fund value.
The New Zealand administration fears this free and simple approach to pension savings will undermine the nations status as an offshore fiscal centre.
New rules will restrict QROPS pensions to residents or govt employees from overseas, getting rid of the loophole letting non-residents exploit the law.
Pension providers are attempting to clean up their act in advance of any governing by collaborating on a code of practice – and one has stopped receiving QROPS transfers.
New Zealand desperately wants to continue providing QROPS services, but realizes the current rules could mean HMRC withdrawing the hallowed QROPS standing if the loophole isn't close.
Withdrawing QROPS New Zealand standing will leave thousands of ex pats facing ruinous fines and penalties for taking unapproved pension withdrawals. These could add up to at least half of the first fund transferred in to a New Zealand QROPS, whether or not the cash has been withdrawn and spent
