The UK pension transfer market represents a plum opportunity for a “top tier” NZ financial services brand, according to Therese Singleton, AMP Services general manager.
Singleton said AMP was about to release a “sharply-priced” qualifying registered overseas pension scheme (QROPS) product to tap into a potential $500 million a year market.
She said AMP scoped out the QROPS market – which has faced a regulatory shake-up both here and in the UK – after fielding queries from its distribution network.
The QROPS product, which recently received approval from the UK tax department, will be housed in AMP’s $2.4 billion NZ Retirement Trust (NZRT).
“By our estimates the market has annual cashflows of about $500 million with existing QROPS [NZ accounts] of $1.5 billion,” Singleton said.
In 2015 a ruling by Her Majesty’s Revenue and Customs (HMRC) cut all KiwiSaver schemes out of the QROPS game, leaving only about a dozen providers on the field.
While the current crop of HMRC-approved NZ QROPS numbers about 30, at least half of those are private schemes managed on behalf of individuals.
Of the remainder, the most significant schemes include Britannia, the Fidelity Super-Super Plan (now owned by Grosvenor), and the Christchurch-based i-Select. Craigs Investment Partners, the Kiwibank-owned GMI and the Medical Assurance Society also feature on the QROPS list.
Britannia, the largest NZ QROPS provider, reported total funds under management – with investment outsourced to Australian firm IOOF – of about $460 million across its two schemes. Meanwhile, Grosvenor manages about $440 million in its QROPS product, which it purchased last year following Fidelity’s decision not to apply for a managed investment scheme (MIS) licence.
Under the Financial Markets Conduct Act (FMC) all QROPS managers will have to have an MIS licence to operate.
Singleton said the rigorous MIS requirements could see a number of other QROPS providers exit the scene. As well as needing to have an independent trustee, MIS managers have other onerous reporting duties that could be beyond the resources of smaller QROPS providers.
“It cost us a lot of time and money to be ready for the new regime,” she said.
According to Singleton, AMP could absorb some of the smaller QROPS providers over time.
However, the industry was also waiting on clarity from the Ministry of Business, Innovation and Employment (MBIE) on how QROPS – which isn’t mentioned specifically in the FMC – would be treated post the December 1 regulatory deadline.
“[The exclusion of QROPS from the FMC] was an oversight more than anything,” Singleton said. “MBIE have assured us they’re getting on to it [with a regulatory solution] in time for December 1.”
Regardless, she said the flows into the NZ QROPS market were unlikely to dry up despite recent changes to the tax treatment of UK pensions here.
While Brexit, and the subsequent slump in the UK pound, may have put pension transfers temporarily on hold, Singleton said the immigration dynamics still favoured steady flows of British migrants to NZ.
“Brexit may actually encourage more immigration to NZ,” she said.
As reported last week, AMP has expanded the range of funds in the NZRT (as well as its KiwiSaver scheme) partly to provide greater choice to QROPS clients.
Singleton said AMP has done away with many of the complex fees common in the QROPS market as well as adding features such as online access and mobile-friendliness.
The AMP QROPS offering goes live on July 28.