UK pension transfers in New Zealand

Transferring your UK pension to a New Zealand Qualifying Recognised Overseas Pensions Scheme (QROPS) is a major financial step. Before transferring, it is important you consider the advantages and disadvantages. We’re here to help make this as straightforward and clear as possible.

Person transferring UK Pension to New Zealand NZ

Incorporate your UK pension into your retirement planning

Consolidating your pension in New Zealand makes it easier and simpler to manage your retirement finances – particularly working out how much you have and whether it is invested appropriately. By having your pension in NZ it minimizes future exchange rate risks if the Pound weakens against the NZ Dollar and you suddenly find yourself at retirement needing to use your pension with a poor exchange rate.

Who can transfer?

Returning New Zealand citizens; UK nationals who have migrated to New Zealand; and Non-UK nationals with UK Pension benefits who have migrated to New Zealand.

We require transferring clients to be living in New Zealand with the intention and ability to reside and retire in New Zealand permanently. You may not be able to transfer your UK Pension to New Zealand if you are already receiving income from an annuity purchased from benefits accrued from your UK Pension Scheme. You are no longer able to transfer government funded defined benefit pensions (NHS, teachers, police etc).

Defined contribution and defined benefit schemes explained

There are two types of UK pension schemes; defined contribution schemes and defined benefit schemes.

A defined contribution scheme is based on a mix of your contributions and investment returns over time.
A defined benefit scheme provides its members with an income for life from their retirement date calculated using a set formula. The calculation is based on a range of measures but usually linked to the member’s final salary. The main risk in such plans is the provider getting into financial difficulty and being unable to honour their commitments.

The structure of your pension will determine the advice process you must undergo in order to transfer it to a New Zealand QROPS.

If you have a defined benefit scheme with a value over GBP30,000, you must get a licenced UK financial adviser to analyse the transfer value. We can arrange this for you.

NZ tax and your UK pension

Transfer your UK pension to New Zealand within 4 years of arriving and you will pay no tax on the transfer. If you have been living in New Zealand longer than four years, you could have a tax liability on your pension transfer. Unlike in the UK, there is no Inheritance Tax to pay in New Zealand in the event of your death.

Can you use your pension to pay the tax?

Yes - if you are over 55 and eligible to withdraw some of your pension. Unfortunately, you cannot use the transferred funds to pay the tax if you are under 55 – which means you need to pay the tax out of income. However, you must be aware that for every year that you delay transferring, the tax liability increases.

Are NZ pensions paid out tax free?

Yes. By transferring into a New Zealand superannuation scheme, any withdrawals, as long as they are conducted in line with HMRC rules, will have no New Zealand tax deducted from them.

How is the tax calculated?

There are two methods under which UK pension transfers may be taxed in New Zealand:
The ‘Schedule method’: Under this method a person is taxed on the amount of their UK pension transfer based on their “attachment to New Zealand”, that is the number of years that they have been tax resident in New Zealand (not counting the 48-month exemption period) prior to them transferring their UK pension. The amount of the transfer that is taxable in New Zealand is a percentage of the amount transferred, as determined by the schedule. This is the default method for calculating the taxable amount arising from your UK pension transfer. I am happy to assist you in estimating the amount of New Zealand taxable income arising from the transfer of your UK pension under the Schedule method should you wish.

The ‘Formula method’: This method seeks to determine the actual growth in the amount transferred during the time you are tax resident in New Zealand. You can choose to use the formula method instead of the (default) schedule method, unless you have previously used the schedule method for a previous transfer from your UK pension scheme.

The New Zealand tax rules applying to the transfer of UK pensions are complex. Accordingly, if you have any concern about the tax consequences of the transfer, we recommend that you seek specialist tax advice before proceeding with the transfer. We are happy to assist in arranging such advice should you wish.

Meet our UK pension expert

Kathryn is our UK Pension specialist. Kathryn says “Deciding whether to transfer a UK pension to New Zealand can be complicated. I really enjoy helping people understand what their options are – whether or not to transfer, and what the best options are for investing those funds for their retirement.”

Chat to Kathryn about your UK Pension now

“Having someone local that could explain the ins and outs of transferring my UK pension was so helpful. I’m now able to factor in my pension to my retirement plan and know it’s invested properly.”

MW, Business owner, Motueka

Keep in control of your retirement funds

Once your UK pension is transferred into a NZ QROPS it is important to structure your investment according to your age and risk profile - we offer a choice of investment funds tailored to meet your retirement needs.

Where will my pension be invested in NZ?

We use two different providers for UK pension transfers - Superlife and i-Select. This gives us the flexibility to select a provider that suits the individual and which fits with their overall investment plans.

It also gives us a huge amount of choice when it comes to investment selection - currency options, active or passive funds, conservative or growth oriented.

Both providers have some of the lowest ongoing management fees and low or no entry fees.

When can I get access to my pension?

The circumstances in which you are able to withdraw the amounts transferred to the Service from a UK pension scheme are governed by the UK Pension Rules.

You are only able to withdraw your investment in accordance with the UK Pension Rules which allow you to withdraw:
- when you reach the UK normal minimum pension age (currently age 55 and increasing to age 57 from 6 April 2028); or
- if you meet the ill-health or serious ill-health conditions under UK law.

What about the exchange rate?

Many people are nervous about transferring their pension because of the GBP-NZD exchange rate. As the transfer process can take several months, it is impossible to predict which day the transfer will happen and what the exchange rate will be. We have the option to do the transfer now, allocating the funds to a GBP account ahead of a gradual transition to NZD strategies over time.

What happens next?

1. Obtaining information about your pension

The first step is to sign an authority allowing us to request information about your pension from the scheme provider. They will let us know the transfer value and any requirements. We will then give you some options on whether or how to proceed. At this point we will let you know the cost of transferring your pension and give you an indication of your potential tax liability (although we do not provide tax advice).

2. Transfer process

If you decided to go ahead, you will need to complete some transfer documents as well as provide proof of identity and address. We also design an investment strategy for your pension funds when they arrive in New Zealand.

Once all the UK Pension provider requirements are met, they transfer your pension directly to the NZ scheme to be invested. This process can take 3-6 months – a lot depends on the speed of the UK Pensions Scheme. It is not a quick process.

What does it cost?

There is no charge to investigate and retrieve your pension information from overseas, and you're under no obligation to proceed with us once we have.

Initial Transfer costs

Castle Trust does not charge for the transfer of your UK Pension to NZ.
Defined Benefit schemes may require advice from a UK adviser which will incur a cost. This can be deducted from your fund.

Our ongoing fee

Once your pension is fully invested Castle Trust charges 0.75% of Funds Under Management annually. This pays for our ongoing retirement planning advice, fund monitoring and administration.

Scheme management costs

We recognize that few pension transfer providers are upfront about the ongoing costs. We don't think this is best practice.

The exact fees depend on the investment fund used and we will discuss this with you when considering the most appropriate investment option. SuperLife ongoing management charges are around 0.62% for their growth fund plus an annual $60 admin fee (+GST). i-Select fees vary considerably due to the number of available investment options. For most clients we would expect the annual fees to be around 1.05%. Our fee is on top of this.
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