NZ Pension Transfers
Drawing a British Pension in NZ
Pension transfers to NZ are becoming a more popular and viable option for Brits living abroad. More than 25,000 Brits headed to NZ in 2006 and more than 70% of New Zealanders are of European descent of which the majority are British.
If you are moving to New Zealand, you can take advantage of the New Zealand QROPS scheme in order to avoid UK income tax, capital gains tax, dividends tax and inheritance tax on your UK pension. Once you have been abroad for 5 years and you reach the age of 55, you can take up to 100% of your pension as a cash lump sum upfront. Although there would be higher fees for cashing in 100% and is not encouraged by HMRC. A typical lump sum payment is only 30% in other jurisdictions with 70% of the pension earmarked to provide an income for life.
However, if you have a credible property portfolio already and wish to cash in your pension to invest in further property to provide an income or need cash until you are out of negative equity, this may be the way forward.
Do I need to be a resident in NZ to take advantage of a NZ QROPS?
No, you could live anywhere outside of the UK and move your pension into a NZ QROPS.
Can I move into a NZ QROPS if I have an annuity?
No. If you have an annuity or you have an occupational scheme and are taking benefits, you are ‘in retirement’ and would not normally be able to transfer, although it would be up to the discretion of your current scheme.
Most other types of private pension schemes are transferrable.
Will I pay taxes on my pension fund after transfer?
Yes, New Zealand pension funds are taxed on income and capital gains. The provisions are complex and depend on the asset make-up of the fund. But to think in terms of an effective tax charge of about 1.5% p.a. on the fund value is about right. The New Zealand government is expected to remove this tax charge later this year.
Can I get a 100% lump sum from a NZ QROPS transfer?
from International Adviser Article 24th Feb, 2010
‘Following a transfer of UK pension rights to a QROPS, and the taking of benefits before the member has been non-UK resident for more than five complete tax years that benefit payment is reported to HMRC. If benefits are taken exceeding those permitted under UK rules, an unauthorised payment charge of 55% is levied. But after five complete tax years the requirement to report payments cease and the possibility of a penalty payment is extinguished.
This is true so long as the QROPS is not an “investment regulated” scheme. If the QROPS is “investment regulated” then payments from the scheme are reportable indefinitely. An unauthorised payment charge will then apply if investment is made into “taxable property” (most notably residential property), or if a transfer is made from the QROPS to a non-UK scheme which is not also a QROPS.
New Zealand law does not allow for members to direct fund investment, it only allows investment choice from a menu of options. Thus New Zealand QROPS are not “investment regulated”.
If payment is made from a New Zealand QROPS when the member is not tax resident in the UK and has neither been UK resident in that UK tax year nor in any of the previous five tax years then it will not give rise to an unauthorised payment charge.’
Kiwi Saver Schemes
HMRC has written to the Government Actuary in NZ confirming that Kwisaver Schemes are deemed to meet the requirements of the QROPS regulations.
Pension Experts NZ
For pension transfers to New Zealand QROPS, the best advice is to take a 30% lump sum and use the rest for a pension income for life. A 100% cash-in is available, but is not recommended as you will face higher fees. However, if you need the cash for investment, it is available.
QROPS NZ Mis-selling
Click here for the recent draft of new legislation regarding QROPS in NZ. The new draft states that only residents of NZ should be able to tansfer into a NZ QROPS. For the latest NZ QROPS news and updates, go to QROPS NZ news updates.
For more information and access to the best available QROPS for your pension situation, please email us: