By Sue Stewart GDipBus (Personal Financial Planning), CFPCM
Financial Adviser – Investments
While we have been helping many clients transfer their UK pensions to NZ for many years now, at the recent GPCMESouth conference we had a lot of inbound enquiry around this topic, so thought it worthwhile to include a summary of points to consider if you have recently joined us from the UK – and for this we welcome you and thank you!
For clarity, there is no option to transfer out of your NHS pension, because this is an unfunded government-funded defined benefit pension scheme. Therefore, this summary only relates to other private UK pensions.
First and foremost, you should NOT transfer your UK pension to New Zealand if there is any chance that you will retire back to the UK or emigrate out of NZ after the transfer.
So, if you have permanently moved to NZ the reasons for transferring your overseas pension may include:
- Simplify and consolidate your retirement savings – everything based in your country of residence and eliminating currency fluctuations.
- Potential tax benefits – a NZ QROPS scheme can offer different tax treatment, simplifying your tax obligations. Generally, the sooner you transfer your funds the lower the “schedule rate” that applies. You do need to note there is a tax obligation if you do decide to transfer.
- More flexible rules on passing funds on at death than most UK pension schemes.
- Investments managed under NZ rules (local oversight and local adviser access) – and these provide a simpler (and usually lower) tax structure.
- Currency Fluctuations – if you will spend your retirement in NZ, holding funds in a NZ based investment strategy (but globally diversified) then currency fluctuations are one less risk for you to consider.
- After you have been non-UK resident, and funds have been in a QROPS Scheme for more than 5 years, you are likely to have more flexibility as to how you access your pension funds.
Disadvantages:
- You must transfer to a qualifying scheme (QROPS/ROPS) as otherwise heavy tax impositions apply. Many NZ companies that provide this service charge a large upfront fee on your transfer. However, there are NZ companies that will provide a great service, with no fee, so ask us if you would like more information on a no transfer fee option.
- If you have been in NZ for less than 4 years your transfer may be exempt from NZ tax, but after this period tax implications will apply. Please ensure you get qualified tax advice from a qualified accountant, so you are aware of your tax obligations before you decide whether to transfer or not.
- If your circumstances change and you do need to change your country of residence, or access transferred funds before tax rules allow, there are likely hefty taxes that can apply.
- Loss of overseas pension protections and benefits – some UK workplace pensions have guarantees (protected retirement income, good inflation link, spouse benefits) that won’t transfer to a QROPS. Having said this, if you do decide to transfer to a QROPS scheme, all funds transferred remain your property and therefore form part of your Estate when you die (so all funds available for your estate, not just the spouse allocation (usually half the annual pension amount).
Summary:
- Before transferring UK pensions to NZ, you do need to ensure your move to NZ is permanent and you expect to retire in NZ.
- Ensure you seek regulated advice before making any overseas pension transfer, to ensure you understand advantages and disadvantages, and likely associated benefits and costs.
- Please feel free to contact us for a discussion on your UK pension (or other overseas pensions) for further information.