A rule change that took effect this year means that people who transferred their UK pensions to KiwiSaver funds in New Zealand more than a decade ago might find they now have more options.
Here is what you need to know.
Locked-in funds
The UK Government changed its pension transfer rules in 2015, which meant that people who wanted to move their money to New Zealand could no longer put it in a KiwiSaver fund.
This was because it was concerned about the KiwiSaver provisions that allow for early release of money when people are in significant financial hardship, or buying a first home.
UK pension money cannot be accessed until someone is at least 55, or 57 as of 2028, and cannot be used for a house purchase or in cases of hardship.
The rule change meant that people who had transferred their money before that time were stuck because they could not have more than one KiwiSaver scheme, and could not transfer their UK pension to another provider without the potential for a huge tax bill from the UK.
What changed?
From April this year, money that had been transferred from UK pensions and was “locked in” to a KiwiSaver scheme was able to be moved to a New Zealand qualifying recognised pension scheme (QROPS). Only the portion of the KiwiSaver fund moved from the UK can be transferred.
The entire amount of funds needs to be moved in one transaction and the QROPS scheme an investor is transferring to needs to provide written consent to receive the money. There is no tax charged on the transfer and there is no risk of UK penalties.
What is the benefit?
This gives a lot more flexibility for people who moved their money before 2015.
They can choose where they want their UK pension to go, and will have flexibility when it comes to which KiwiSaver provider they want to have the rest of their investments with.
In a QROPS, investors can access their money up to 10 years earlier than they could if they kept it in KiwiSaver.
It could also benefit New Zealanders or UK expats who are thinking about bringing their pensions to New Zealand, or reviewing the tax implications of the move, because the QROPS landscape has changed again and we may see more options made available to cater for this shifting money.
Wondering about moving your pension?
If you’ve moved to New Zealand and are thinking about bringing your pension, too, there are a few things to think about.
You might like the idea of having all your investments in one country, to be able to monitor them easily.
Withdrawals from a pension scheme in New Zealand are generally tax-free, which is also seen as a benefit by many investors.
Once you become a tax resident, there is a four-year transitional tax exemption period that may mean it is sensible to make a shift sooner rather than later, if you think it could be the right path for you.
But there may be reasons not to move, too. It could be a question of timing for currency considerations, or you might like having your investments spread out.
Our expert team can chat with you to find a solution that fits your strategy and individual needs.
Like to talk?
With this change in place, and before the next financial year, it may be a good time to review where your UK pension funds are, and whether a transfer or consolidation might make sense.
We can answer any questions you may have about transferring your UK pension, or your wider investment strategy.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
