UK Pension Transfers

There are many UK immigrants coming into New Zealand who have pension plans left in the UK. This also applies to returning Kiwis who may have joined schemes whilst working in the UK. You may be able to transfer your UK pension funds to New Zealand, however there are pros and cons. There are many differences between the UK Pension system and New Zealand rules. There have been changes to the rules regarding transferring UK Pensions over recent years with the QROPs regime being introduced back in 2006.

Further changes to the QROPS regime have been introduced by HMRC in the UK with effect 6th April 2012.  The key changes to the rules mean that approved QROPS schemes now have stricter restrictions on withdrawals, the ability to offer a 30% withdrawal at retirement age plus the scheme will need to provide an income for life. It is important that you get professional advice, as transferring may not be the best option for you now. Richard Harden was a UK adviser before immigrating to NZ so he has experience in this field and can assess your position and advise you appropriately.

Some of the key issues are as follows:

Your current position

Depending upon your personal situation now may not be the best time to transfer your pension to NZ. Many UK pension schemes still receive useful tax breaks and transferring your pension to a NZ scheme may not be the best thing to be doing. This especially applies to people who are years from retirement age. Currency issues can also play a part if the receiving scheme has only a NZD$ account.

New Rules

The regulations regarding QROPS transfers came into effect from 1 April 2006 and were updated in April 2012. If you transfer, it is important that your UK pension funds to be deposited into a Qualifying Recognised Overseas Pension Scheme (QROPS). If your funds were transferred to a non-QROPS scheme it is viewed as an 'unauthorised member payment' which could be liable to significant tax penalties. We have access to a number of qualifying schemes.

Early Withdrawals

We have come across many people whose sole intention is to get their funds over to NZ and then take the monies out. HMRC have made it clear that QROPS schemes should not be providing access to fund prior to retirement age. Early access to funds could give rise to a major tax penalty therefore deal with an adviser who understands these rules.

Advantages of Transferring

Depending upon your personal circumstances there can be some significant advantages in transferring your pension to NZ. The key advantages are in regard to:

  • Significant tax savings can be made, as withdrawals from NZ Superannuation funds are mostly deemed as a return of capital and non taxable. Generally in the UK after any tax free cash has been taken, your pension is taxable income.
  • Depending upon the retirement age of your UK scheme, you could gain more flexibility with your retirement savings by having access to 30% at an earlier age.
  • Estate Planning issues. Generally in the UK upon death your pension dies with you unless spouse’s benefits are built in. Upon death in New Zealand any residual monies can be left to your estate or nominated beneficiary.
  • Avoiding UK annuities. For many people purchasing an annuity in the UK may not be the best option. Having transferred funds to a NZ Superannuation scheme at retirement you are not forced into buying one.  Your NZ QROPS scheme will provide an income for life option for you but this is more flexible than purchasing an annuity.
  • Avoiding UK annuities. For many people purchasing an annuity in the UK may not be the best option. Having transferred funds to a NZ Superannuation scheme at retirement you are not forced into buying one. 
  • Controlling investment decisions: Depending upon the NZ QROPS you use, most schemes offer various investment choices. Rather than having to deal with UK providers it can be far simpler dealing with NZ providers.

 
Due to the QROPS rule changes in April 2012, the number of approved schemes has been significantly reduced. There are a number of banks, companies and individuals that can transfer your UK pensions to New Zealand with many only offering execution only transfers. For many people their preserved pension benefits in the UK can amount to significant assets therefore it is important that you get professional advice based on what is appropriate for your needs. Make sure your adviser has the capability and skills to properly analysis the pros and cons of your transfer.