The fund in the UK

Before any benefits are taken from a UK pension fund, it is likely to be exempt from tax from both UK and NZ tax. Specific NZ exemptions apply to occupational and personal pensions provided further contributions are not made outside of strict time limits.

Once benefits are taken from the UK fund, all receipts (including any initial lump sums) are taxable in NZ on an arising basis. The exception to this is where the recipient is a Transitional Resident person (someone who arrived in NZ for the first time after 1 April 2006, or returned to NZ after an absence of at least 10 years) in which case receipts are tax-free for a period of up to 49 months after arrival in NZ.

Under the UK/NZ Double Taxation Agreement, pensions paid from the UK are taxable only in NZ. Exemption has to be claimed and we can assist with such claims.

In certain circumstances, members will be permitted to make additional contributions to the fund even after they have ceased to be UK resident and still receive UK tax relief.

The transfer of the fund

On the basis that it is a transfer from a UK registered pension scheme to a NZ registered superannuation scheme that has been approved as a QROPS, the transfer of the fund will be exempt from tax in both the UK and NZ.

The fund in New Zealand

The fund will be chargeable to NZ tax on all its income at a flat rate of 33% and will probably be exempt on its capital gains (capital gains can be chargeable in some circumstances). Any payments out of the superannuation fund to the member, whether they are a return of contributions or the payment of retirement benefits, will be exempt from NZ tax.

For UK tax purposes, for a restricted period of time, if the super fund invests in assets that are not permitted, or if the it lends money or assets to the member, or if it returns contributions to the member, the Trustee will be obliged to notify the UK tax authorities. They will then seek to charge tax of up to 55% of the amount of the breach of rules.

Most pension schemes in the UK are exempt from UK Inheritance Tax (IHT), and this exemption extends to the funds transferred to a QROPS such as those that operate in NZ. In exceptional cases some UK pension schemes are not exempt from UK IHT and they will remain liable to UK IHT when they are transferred out of the UK. Similarly, if a fund is transferred from the UK to a NZ QROPS and then subsequently withdrawn, the fund may fall into the UK IHT net. Some consideration of your UK IHT position is therefore necessary.