What is grandparenting?

Grandparenting is a term used to describe transitional provisions in the tax legislation that have the effect of applying the old tax rules to the grandparented policy for a period of time (5 years in most cases). Policies in force prior to 1 July 2010, and in limited circumstances policies applied for before 1 July 2010, may qualify for grandparenting.

Only for policies:

entered into before application date (1 July 2010) or policies for which an application and deposit is received before 1 July 2010; and

for which the amount of life cover does not increase by more than 10% (or by CPI if greater) per annum (subject to some exceptions for certain business, e.g. compulsory Workplace)

Summary of grandparenting

None

5 years

>5 years

3 years

New policies from 1 July 2010 (if no application and deposit received by that date)

Existing policies with a greater than 10% increase in cover during the year

Life policies that are not pure risk (i.e. those with savings component)

Existing term life policies as at 1 July 2010 or policies with application and deposit received by that date, other than contracts

Any term contract at 1 July 2010 that has 'level' or 'guaranteed' premiums and no more than 10% increase in cover during the year. Length of grandparenting is linked to period of premium guarantee*

Qualifying compulsory Workplace

*Note: that to qualify as a 'level' or 'guaranteed' premium policy, the dollar amount of premium cannot change. A premium adjusted for CPI would not qualify as 'level' or 'guaranteed'.

Updated category 1 & 2 product listings

4/08/2011

The new legislation has categorised financial products into two categories (Category 1 and Category 2), and sets out which type of adviser is qualified to advise and sell. Many advisers are wondering if the products they sell or have on their books are Category 1 or Category 2 products.

Asset Magazine - A Dummies Guide to QFEs

18/01/2011

Asset Magazine look at the QFE space and what it means for advisers.

This article outlines what a QFE is and what options there are for advisers in the new regulated environment.

Asset Magazine - QFE Article Dec 2010

When do financial advisers have to register?

19/11/2010

After consultations with the Ministry of Economic Development this morning, we received clarification on who needs to be registered by 1 December.

Sovereign takes the lead in a new regulatory world

16/11/2010

Sovereign is embracing legislation that will set new professional standards for financial advisers by applying to become a Qualifying Financial Entity (‘QFE’).