What are the main reasons to transfer my pension fund to NZ?

The flexibility of investment, the flexibility of retirement benefits, tax advantages when benefits are taken, and the fact that the fund does not die with you. There is always a risk that future transfers will be forbidden or even more restricted than they are at present.

What are the main reasons to keep the fund in the UK?

There may be valuable options and guarantees preserved within the UK scheme that outweigh any tax disadvantages. In certain circumstances, and for a limited time, it is possible that additional contributions may be made to the UK scheme that attract UK tax relief.

What are the requirements for the transfer to a NZ scheme?

The transfer must be to a QROPS (Qualifying Registered Overseas Pension Scheme).

Can I transfer my pension fund before leaving the UK?

Under the new rules that apply from 6 April 2006 you are able to transfer to a QROPS outside the UK whilst still being resident in the UK.

What funds can be transferred?

• Occupational pension schemes
• Personal pensions
• Appropriate personal pensions
• Section 32 buy-out schemes
• Small Self Administered Schemes (SSAS)
• Alternatively Secured Pension Schemes (aka Drawdown Schemes)
• Occupational pension schemes in payment (provided the scheme rules allow this)

Included in some of the above will be GMP (Guaranteed Minimum Pension) rights (rights built up from diverted National Insurance contributions – Version I), Protected Rights (rights built up from diverted National Insurance contributions – version II) and non-protected rights, each of which can be transferred to New Zealand

What schemes can I transfer it to?

Most superannuation schemes in NZ have registered as a QROPS, including our own (self invested) Sempiternal Fund. Another option is to establish your own superannuation scheme and we can assist you with this also.

What is involved in establishing my own superannuation fund?

Scheme rules must be adopted, which effectively sets up the superannuation trust, and this must be registered with the Government Actuary. A number of other conditions must be satisfied at the same time. Following this, the scheme can apply for QROPS status in order to receive UK pension transfers.

Annually the scheme’s financial statements must be audited by a Chartered Accountant and filed at Companies Office and with the Government Actuary together with a Trustees’ Report. This generally means greater annual costs, but provides complete control over your fund by virtue of trusteeship of the scheme.

Can I decide how my funds are invested?

To a greater or lesser extent the answer to this is yes. The retail schemes will offer broad options on investment (mainly unit trusts), whereas the Sempiternal Fund is the equivalent of the UK’s SIPP (Self Invested Personal Pension), and your own superannuation fund is the UK equivalent of a SSAS (Small Self Administered Scheme). Subject to restrictions in the case of those that have been resident in the UK at any point in the previous 5 UK tax years (they can invest in anything a UK pension scheme can invest in), the range of investments in the latter two schemes are unlimited.

How safe is the transfer?

The transfer is between UK pension scheme and NZ superannuation scheme. Where the receiving scheme is a retail scheme (e.g. run by one of the large insurance companies), we will not handle your money and it will be received directly by the insurance company, where the receiving scheme is the Sempiternal Fund, we act as Trustee and will receive and invest the money on your behalf. When you establish your own registered superannuation scheme it is likely that you will be the trustee, in which case you will receive the transfer money yourself as trustee.

What are the main tax issues?

UK pension funds are free of any UK or NZ taxes, giving scope for higher growth rates. In certain circumstances, and for a limited time, it is possible to make contributions to UK pension schemes from NZ and still receive UK tax relief.

UK pension schemes will not release funds unless they have proof that the NZ scheme is a QROPS, so the danger of a 55% unauthorised payment tax charge is small. Investment and subsequent use of the funds is crucially important to avoid any UK tax issues.

Within a NZ superannuation scheme the income will be taxed at 33%. Capital gains are often tax-free, but this may depend upon the type of scheme (e.g. whether or not it is a PIE – a Portfolio Investment Entity) and the activity within the scheme.

What about my UK State Pension entitlement or UK government disability pension?

You cannot transfer your UK State Pension entitlement, and it will be fully taxable here in NZ when it starts to be paid, subject to Transitional Resident relief.

We obtain a UK State Pension forecast as a matter of course in order to provide you with complete information, but also to advise you on the possible benefit of making voluntary contributions to the UK State Pension scheme.

Even though UK State Pension entitlements are offset against any NZ Government superannuation entitlement, there may still be benefits to building up your UK State Pension entitlement, particularly if you may not retire in NZ.

What are the costs of transferring a UK pension fund?

Our transfer fees are between 2.5% and 1.5% of the value of the fund transferred depending upon the size of the fund. For this purpose we add together the value of any related funds referred to us at the same time (i.e. friends, family, colleagues, acquaintances etc.).

A separate Entry Fee is charged by the Sempiternal Fund if this is the recipient scheme. The charge is normally 2%, but is negotiable depending upon the size of the fund being transferred.

If we establish your own registered superannuation fund a separate fee will be negotiable that includes all disbursements and registration fees.

How long will it take?

This is not quite “how long is a piece of string” but close to it. Much depends upon: the speed at which information and documentation is provided to us by you; how quickly the organisations in the UK respond to us; how complete the information and paperwork is from the UK; and how quickly decisions are made by you, It goes without saying that we will endeavour to do our bit as quickly and efficiently as we can. Expect transfers to take between 3 and 6 months on average.

Can I make withdrawals from the fund when it is in NZ?

The answer to this question is not simple. The same benefits can be taken from the fund in NZ from age 50 as would be permitted by a UK scheme without UK tax consequences. This means being able to take 25% of the fund immediately and regular agreed amounts of income thereafter. If withdrawals other than those permitted are made from the NZ fund and you have been resident in the UK within any of the previous 5 UK tax years, this will be an unauthorised payment subject to UK tax at up to 55%.

For NZ purposes, before the age of 55 any withdrawals are withdrawals of contributions, and from the age of 55 any withdrawals are the payment of retirement benefits. Neither have any NZ tax consequences.

What are the exchange rate considerations?

It takes time to transfer a UK pension to NZ, so any sudden improvement in the exchange rate is unlikely to be of any use if the fund is still in the UK (unless it is in a self invested personal pension and you are permitted to invest in currency bank accounts). Aside from some very brief interludes, the GBP/NZ exchange rate over the last 6 years has been generally unfavourable and there is little on the horizon to suggest that this will improve.

What currency options you have depends upon the scheme you decide to transfer to. Most retails schemes require immediate conversion to NZD, whilst some allow you to retain GBP, but have limited investment options thereafter. The Sempiternal Fund allows investment in GBP, as would your own registered superannuation fund, with very flexible investment options should you decide to convert some or all of your to NZD at some point in the future.

We have assisted some clients with exchange rate strategies (e.g. swaps or options) but this is a complex area and not without investment risk as well as reward.

Should I transfer my pension funds to NZ if I think I may retire in the UK?

This depends upon a number of factors, including the rights and benefits of the UK scheme you are transferring out of. If you go back to the UK to retire and have not taken benefits out of the NZ scheme, it is possible to transfer your NZ superannuation entitlements to a UK scheme, but it will not be the same scheme that you originally transferred out of.

In some circumstances you may be able to withdraw the full amount of the NZ superannuation fund in cash, return to the UK and make pension contributions to a new scheme and obtain further UK tax relief.

Am I eligible for NZ Government Superannuation?

To be entitled to NZ Government Superannuation you must be aged 65, resident in NZ and you must have been resident in NZ for at least 10 years, 5 of which must have been after the age of 50. If you are a former resident of UK, under the Reciprocal Agreement between the UK and NZ any time spent as a resident of the UK is treated as time spent a resident of NZ for this purpose.

What are my options if my pension is already in payment?

It is technically possible to transfer a pension in payment provided it is not an annuity provided by an insurance company. This requires the rules of the UK scheme to allow this, and it is rare that they do. Further regulation on this is expected in the UK to make this a more widely available option.

If you are a resident of NZ, notwithstanding that your UK pension may be exempt from tax under the Transitional Resident rules, the pension is not taxable in the UK. Relief under the Double Taxation Agreement between the UK and NZ can be claimed to ensure that PAYE is not applied to your UK pension and also to claim back any PAYE deducted since you ceased to be resident in the UK.