Christchurch-headquartered UK pension transfer specialist, i-Select, has appointed Mercer as underlying manager for a new fund aimed at mainly offshore investors.
Chris Heffernan, head of i-Select, said the new product had up to $20 million queued up for transfer once it is approved as a qualifying recognised overseas pension scheme (QROPS) by the UK tax authority.
Heffernan said the i-Select scheme was likely the first foreign variable-rate PIE to hit the market, which created a tax-effective UK pension transfer option for investors based in a range of jurisdictions including Europe and Australia.
Foreign variable-rate PIEs can invest in both NZ and offshore assets with different underlying tax rates depending on investment type and domicile of the investor.
According to Heffernan, the new fund could appeal to non-resident New Zealanders, Australians who have hit their superannuation buffers, and the large UK diaspora scattered throughout the world.
I-Select already manages about $330 million through its long-established superannuation scheme that mainly services UK pension transfers for NZ residents. The non-PIE i-Select scheme includes an extremely wide investment choice to accommodate all manner of client preferences: i-Select also houses roughly two dozen ‘single member schemes’ that have almost complete investment freedom.
However, the new i-Select scheme follows a more constrained investment list with five underlying Mercer multi-manager funds: three products – the Mercer conservative, growth and balanced portfolios – are domiciled in NZ while the ‘Moderate Growth’ and ‘Diversified Retirement’ funds are housed in Australia and Ireland, respectively.
“We chose Mercer because of its institutional feel and the fact it has a global presence in our target markets,” Heffernan said. “We are facilitators not investment specialists. Our point of view is more about providing tax expertise.”
The i-Select scheme also includes former Russell Investments NZ head of asset consulting, Andrew Johnson, as independent adviser, and Public Trust as supervisor.
Johnson’s role covers the “appointment of and all aspects of the work undertaken by the Investment Consultant [Mercer]”, the i-Select statement of investment policy and objectives (SIPO) says.
The UK pension transfer market has been a highly lucrative business globally despite a number of rule changes over the last decade. NZ has long been a popular UK pension transfer destination.
Hefferan said the NZ UK pension transfer market probably peaked in 2014 (when new regulations were introduced) with about $450 million entering the country in that year.
He said annual flows to NZ have since eased to about $200 million to $250 million – or approximately 20 per cent of the total pension money transferred from the UK each year.
“But there’s about US$5 trillion sitting in UK pension funds,” Heffernan said. “So the UK government doesn’t see it as a particular problem if the system is leaking a few billion each year.”
The new i-Select PIE fund would probably launch proper in June following a QROPS decision expected in a couple of weeks.