Having spent your entire adult life building up your funds, you deserve to enjoy them, however, and wherever, you’d like. But this is a major financial step and one that deserves careful consideration before it is taken.

From Brits who have settled in NZ, to Kiwis who have returned home after working in the UK, many have found that the pros of transferring their UK pensions over to New Zealand outweigh the cons.

To help you make a fully informed decision, and avoid any unexpected hiccups, in this article we’ll work to clarify the process and outline the most important considerations.

What should I consider before transferring my UK pension to NZ?

Before deciding to move your funds from the UK to New Zealand, ask yourself the following questions:

  • What benefits might I lose by moving the money to NZ?
  • What (if any) fees will I be charged?
  • What are the tax implications?
  • Will there be a change to the age at which I can access my pension?
  • Should I hire a financial adviser to help with the transfer, and who should I choose?

You should also familiarise yourself with Qualifying Recognised Overseas Pension Schemes, otherwise known as QROPS. In short, these are annuity-based funds, based in offshore financial centres, that can help you to transfer your UK pension to New Zealand in a quick, easy and tax-effective manner.

What are the pros and cons of transferring my UK pension to NZ?

Let’s start with the good news: there are a number of benefits that can come with transferring your UK pension to New Zealand, including:

  • More control over your funds (and in turn, your life.)
  • Some NZ pension schemes offer more investment options than UK private pensions.
  • UK-based administrators and former employers can no longer reduce your benefits if they face deficits.
  • There’s no cap on the level of income you take (though be aware that amounts withdrawn over your Lifetime Allowance may be taxed.)
  • No reduction if you choose to retire early (many UK schemes apply a reduction for every year you retire early.)
  • Eliminate ongoing exchange rate fluctuations and international bank transfer charges.
  • Consolidate personal and occupational pensions into a single NZ scheme.

There are however some potential drawbacks that come with transferring your UK pension to New Zealand, including:

  • Losing your UK pension scheme and any associated benefits.
  • Losing any income guarantees that may be built into your pension.
  • Losing any associated spouse or dependent pensions.
  • Losing annual increases and inflation-linked increases that may be built into your UK pension scheme.

Will my UK pension get taxed in NZ?

Your pension can be taken as either tax-paid income or a potentially tax-paid lump sum. If you leave your pension in the UK, you will be liable to pay NZ taxes on any income you take from it. If you bring your pension to NZ, there will be no NZ taxes to pay if it is transferred as a lump sum, provided:

  • You transfer within four years of your move to NZ.
  • You are registered as a tax resident.

Pension transfers and lump sum withdrawals from UK pensions are taxable in NZ beyond that four-year period. Depending on your residency and financial position, your tax liability is based on either the ‘schedule method’ or the ‘formula method’. The mathematics of this can quickly become complex, so at this point, it’s best to seek professional financial advice.

In terms of ongoing tax, NZ pension scheme growth and earnings are generally taxed at New Zealand's standard income tax rates which are dependent on your total income. Earnings on UK-based pension schemes and investments may also be liable for NZ’s Fair Dividend Rate tax. UK personal pensions, meanwhile, can grow almost tax-free (up to the Lifetime Allowance limit.)

Ultimately the control and opportunity that you gain from moving your funds over to NZ can make these higher taxes worth it, but you should carefully weigh up the consequences of such a move.

Ultimately the control and opportunity that you gain from moving your funds over to NZ can make these higher taxes worth it, but you should carefully weigh up the consequences of such a move.

Final thoughts

Retirement planning by itself is complicated enough, and that’s before the complexity and red tape of international finance is added to the mix. Nevertheless, bringing your pension over to NZ could represent a wise move that pays real dividends, both in terms of growth and control.

The combination of importance, opportunity and complexity make this a task worthy of professional assistance. It’s wise to speak with a financial adviser who specialises in these matters to ensure you’re not only doing things the right way, but in the way that is most beneficial to you.

In situations that deal with such large sums, a professional financial adviser will inevitably pay for themselves many times over.

For more information, visit https://www.myfutureplan.co.nz/.