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. The rules regarding transferring UK pension’s to NZ have also changed considerably since April 2006.

We believe 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

New regulations came into effect from 1 April 2006 which requires 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 is 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. Having transferred your UK pension to a NZ QROPS scheme, some schemes may allow you access to some monies prior to retirement age. We suggest caution as there are strict rules regarding early access which could give rise to a major tax penalty. 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.
  • You will gain more flexibility with your retirement savings through having access to your capital.
  • 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.
  • Liquidity issues. Having reached retirement age in NZ and meeting other requirements, you are able to access all your retirement funds tax free. In certain circumstances you may be able to access a portion of your savings prior to retirement age.
  • 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: Prior to retirement most NZ schemes offer various investment choices, however at retirement age you have access to your monies and can therefore completely control investment decisions. Rather than having to deal with UK providers it can be far simpler dealing with NZ providers.

 
There are a number of banks, companies and individuals that can transfer your UK pensions to New Zealand with many offering execution only transfers. Pension transfers have become big business in NZ and often people are receiving average advice. We believe it is important that you get professional advice based on what is appropriate for your needs.