Transferring UK Pension to New Zealand

You may not be aware that it is possible to transfer your UK pension to an approved New Zealand Superannuation scheme (i.e. has been registered and established under the Superannuation Schemes Act 1989). There are no tax breaks on these funds but at your chosen retirement date (from 50 onwards) you have full access to your fund to do with as you wish, you do not have to buy an annuity. Although the fund will pay tax on investment growth and income at the company rate of tax of 33%, you will not be liable to any Capital Gains Tax or any other tax when you withdraw your fund.

Some New Zealand pension funds do have the facility to unlock some of your pension fund, giving partial access to your fund prior to retirement with no further tax to pay.

However, as with all pension transfers from the UK, your UK pension provider needs to be happy to transfer the funds to a scheme where you have some access to your pension. Also the UK Inland Revenue may need to review the transfer in terms of taxation of the fund, so they may have some influence over where the pension funds can be transferred.

Before you leave for New Zealand I recommend that you get all your pension documentation together, such as benefit statements and transfer values. Get as much up to date information as possible. You may need to contact your pension providers for an up to date statement of your entitlements. This will include pensions with all your previous employers, private (personal) pensions, and government pensions.

Before altering changing or transferring any pensions it is first necessary to understand what you want out of life, what your goals and objectives are. This should then be reviewed together with your current situation. It may turn out that you would be better off leaving the benefits where they are, however I believe in explaining all the options available to you and the benefits and drawbacks of each. Only then can a recommended course of action be suggested that fits in with your goals and objectives.

Some of the questions that you might like to consider are:

• When do I want to retire?

• How much will I need in retirement?

• What is the current value of my UK pensions – fund value and/or pension entitlements?

• Have I notified my pension providers of my change in address?

• Will I be entitled to a New Zealand Government Pension?

• Can I rely on the UK and NZ governments not changing their rules for pension entitlements in the future?

• What investment options are there in NZ to build up a retirement fund?

• What can I do if I am close to retirement or have retired?

• What is my tax position in UK and New Zealand?

• Can I keep my UK pension?

Different New Zealand tax rules apply depending on whether the investor is a UK expatriate or is a New Zealand resident who has returned to New Zealand.

The tax rules are complex, but in general any distribution from a UK Pension fund will be taxed in New Zealand. Also, in some cases, the ongoing increase in value of the UK Pension fund will be taxable each year in New Zealand rather than just when funds are distributed. Some exceptions apply, (mainly to UK expatriates) that give a limited window of opportunity to transfer funds from a UK Pension fund to New Zealand within certain time limits.

Certainty of knowing where your funds are

By transferring your pension funds to New Zealand you won't lose track of where they are and how they are performing. You also won't need to be concerned whether the fund is merging, closing or going out of existence.

Estate planning

Most UK Pension funds pay a spouse pension of just 50% of what the member would have received. If there is no spouse or the spouse subsequently dies, then the pension dies also. By transferring the UK Pension fund to New Zealand, the whole benefit is available to a spouse and dependants.

Taxation Issues

Under current legislation in New Zealand, all earnings on funds invested in Superannuation Funds are taxed at a minimum of 33%. However, all benefits are paid free of tax.
Generally there is no tax to pay when the transfer value arrives into the New Zealand Fund. ( Refer FIF exemptions below).

If you acquired an interest in a pension fund which was NOT employment or self-employment related before you became a resident in New Zealand you will be exempt from the Foreign Investment Fund, (FIF), regulations for the rest of the income year in which you first became resident, and for the next three income years.

After this exemption period has expired, you are then required to declare your interest in the fund to the New Zealand Inland Revenue Dept. Income tax will then be levied on any gains the fund has made.

If your fund is employment or self-employment related and you only made contributions to it before you became a resident of New Zealand, then you would be exempt from the FIF regulations.

Further information is available from the following Pension transfer companies in New Zealand:

Britannia Financial Services http://www.ukpensionstonz.com/

Pension Transfer Direct http://www.pentran.co.nz