The government has removed a potential blockage to UK pension flows to New Zealand-based schemes in a Financial Markets Conduct Act amendment released last week.
Included in a raft of last-minute FMC amendments, the new regulations essentially align NZ-based scheme withdrawal rules with the source UK pension fund arrangements.
Under previous FMC wording, withdrawal rules would have made it difficult for NZ-based schemes to meet the rigid UK recognised overseas pension scheme (ROPS) requirements.
According to the FMC ‘Order in Council’ published last week, the amendments “make it easier for superannuation schemes to become… a ROPS… for the purposes of United Kingdom legislation (and to allow money from United Kingdom pension funds to be invested in those schemes)”.
“The amendments prevent certain withdrawals for a ROPS where the withdrawal is inconsistent with the requirements for a ROPS,” the Order in Council says. “The amendments also allow certain withdrawals that are permitted under those requirements.”
It is understood a number of NZ UK pension funds may rushing out new products to comply with the amended regulations.
For example, one of the NZ’s biggest UK pension schemes, the $300 million plus Britannia, will close its fund to new members when it transitions to FMC.
The latest Britannia Superannuation Scheme 2012 prospectus says the trust deed would be amended prior to the December 1 deadline to comply with FMC regulations.
“The scheme will be closed to new members on or after the effective date of transition to the FMCA regime…,” the Britannia prospectus says. “Existing members will not be affected by this change. The scheme will not accept new applications for membership or transfers on or after the date of transition.”
As well as the 2012 scheme, Britannia manages about $220 million in another super fund that lost its ROPS status in 2012.
Britannia has yet to formally transition to the FMC regime and register documents on the Disclose website. However, Australian-based multi-manager IOOF, which manages the bulk of Britannia funds, has been granted its managed investment scheme (MIS) licence by the Financial Markets Authority.
According to FMC regulations, both Britannia super funds would transition as ‘restricted legacy schemes’, closed to new members.
Britannia was not available for comment prior to deadline.
The latest FMC amendments also include changes to fund update requirements for multi-employer and closed superannuation products, clarifying the status NZ-domiciled fixed income assets and convertible debt offers.
At the same time, the FMC amendment exempts “certain conduct” from being treated as insider trading.
“The conduct involves acquiring a debt security, an equity security, or a managed investment product by way of issue. It does not apply to secondary sales,” the FMC amendment says. “The exemption will remain in force until 30 November 2017 (but may be replaced with a more targeted exemption)…”