The Financial Markets Conduct Act (FMC) has prompted another commercial transaction with Fidelity Life handing the keys of its last remaining superannuation scheme to Grosvenor.
In a deal inked last week, Fidelity agreed to sell the management and issuer rights of its $440 million ‘Super-Super Plan 3’ to Grosvenor. It is understood the deal was principally driven by the impending FMC, which would have required Fidelity be become a licensed managed investment scheme (MIS) manager.
According to the June 2015 Fidelity Super-Super Plan 3 accounts, the group was “reviewing its options under the FMCA for the Plan”.
Grosvenor, which also purchased the $600 million Fidelity KiwiSaver scheme in 2013 for about $16 million, was granted its MIS licence earlier this year.
This October Investment News NZ (IN NZ) reported Grosvenor was weighing up a purchase to be funded by a 1-in-10 rights deal and debt.
Fidelity’s Super-Super Plan 3 is essentially a landing ground for UK qualifying registered overseas pension scheme (QROPS) transfers. In the group’s 2014/15 annual report, Fidelity chief, Milton Jennings, says the scheme “continues to benefit from the influx of UK pension transfers”.
“At 30 June 2015 the scheme’s funds under management were $414.5 million, up 49 per cent on a year earlier, as a result of strong investment returns and deposits in the year in excess of $129 million,” Jennings says in the report.
Following a UK tax department ruling this year that excluded KiwiSaver schemes as QROPS destinations, the lucrative trade has been limited to a handful of players.
The latest QROPS list names 31 NZ schemes – down from 34 in June – including 16 ‘SSAS’ funds, which generally have been set up by high net worth individuals for their own pension transfer purposes.
The Super Super Plan 3 collected fees of about $4.9 million over the 12 months to June 30 this year in addition to $123,000 of insurance premiums.
Fidelity resolved this June to wind up its Super-Super 1 and 2 plans, which reported funds under management of $730,000 and $904,000 respectively at the time.
In a statement, Grosvenor said it would be “business as usual” for clients and advisers after it takes over the Fidelity scheme (expected to finalise next March). However, Grosvenor would make some technical changes to the Super Super Plan 3 structure, the statement says.
“For example, it is anticipated that over time the Plan will transition from being an insurance-based to a PIE structure on the Grosvenor platform,” the Grosvenor statement says.
A Grosvenor spokesperson said the underlying investments in Fidelity scheme would remain unchanged for the time-being. Scheme documents list managers as: Nikko; AMP Capital; Grosvenor; Devon; SuperLife; State Street; Vanguard; and, PIMCO.
A number of super funds have either closed or rolled into master trust in the run-up to the FMC compliance end-date set for next December, including schemes offered by NZ heartland companies Alliance, Fonterra and Ravensdown.