Reasons to transfer your pension fund to New Zealand

Whilst there may be legitimate concern about the safety of your pension fund in the UK, particularly in occupational (ie employer) schemes but also some insurance companies, this can sometimes be a little overstated.  Perhaps more valid reasons for transferring are the control that you will gain over your retirement fund and the increased range of investment and retirement benefit options you will acquire.  Combined with significant tax advantages that can be gained at the time of taking retirement benefits and the decision is often a clear one.  Usually the closer a person is to the age of 50 or 55 the more marked the advantages of transferring the fund to NZ.

The biggest contract between UK pensions and NZ superannuation is in the tax treatment of the payment of benefits.  A NZ resident person taking benefits from a UK scheme is likely to pay tax on the initial lump sum (often called the tax-free lump sum, but this is likely to be tax-free only in the UK) and the pension payments thereafter.  A NZ resident taking benefits from a NZ superannuation scheme will pay no tax on any amount received.

Combining the UK's Exempt, Exempt, Taxable1 treatment of pensions with New Zealand's Taxable, Taxable, Exempt2 treatment of superannuation can produce in a very effective Exempt, Exempt, Exempt3 result.

1. Tax relief on contributions, tax-free growth, taxable benefits
2. No tax relief on contributions, taxable superannuation scheme income, exempt benefits
3. Tax relief on contributions, tax-free growth, exempt benefits.

Once retirement benefits start to be taken from a NZ superannuation scheme, if you die the benefits do not die with you.  The remaining fund stays intact and will pass either to your estate or to your nominated beneficiary.  Depending upon the retirement options selected and the type of pension fund it is, if you are taking benefits from a UK pension fund and you die, the fund will often die with you.

Summarising the reasons above, and including others:

The UK Scheme

• The benefits of the UK scheme may be inferior;
• The quality or stability of the UK scheme may be in doubt;
• Death benefits may be inferior, particularly after benefits are taken;
• The fund may be growing by only a small pre-defined amount;
• The ultimate pension will be taxable;
• Transfer fees to remit the pension in payment to New Zealand;
• Exchange rate fluctuations for the pension in payment;
• Older schemes may have no Inheritance Tax protection;
• The UK may withdraw the ability to transfer Uk pension funds to non-EU countries.

The New Zealand Scheme

• Keeping track of the pension plan;
• Gaining more control of the funds;
• Removal of exchange rate fluctuations;
• Greater information and control over the superannuation funds;
• Different investment emphasis to UK schemes;
• A fund in New Zealand may encourage further saving or employer contributions;
• Easier access to money in retirement;
• Possible immediate access to some of the money;
• Greater death benefits for dependents;
• Tax-free benefits;
• The use of transfer money for working capital.