Moving to New Zealand may feel like a permanent decision, but plans can change. Work opportunities, family commitments or lifestyle changes could eventually take you back to the UK or somewhere else.
If you have a UK pension, this possibility is worth considering before deciding whether to transfer it to New Zealand. The decision should reflect not only where you live now, but where you may be tax resident in the years ahead.
Why future plans matter
A UK pension transfer is generally a long-term decision. Once completed, it may be difficult or costly to reverse, and the tax treatment can be affected by where you and the receiving pension scheme are based.
Uncertainty about your future plans does not automatically make a transfer unsuitable. However, realistic relocation possibilities should form part of the advice process, alongside pension benefits, fees, investment options, access rules and your wider retirement plans.
UK rules can continue after a transfer
For a UK pension transfer to be treated as a recognised overseas transfer, the receiving scheme will generally need to be a Qualifying Recognised Overseas Pension Scheme, commonly known as a QROPS.
Transferring to a QROPS does not necessarily bring all UK tax considerations to an end. UK rules can continue to apply to the transferred funds, particularly during the years immediately following the transfer and if your circumstances later change.
Understanding the Overseas Transfer Charge
The UK Overseas Transfer Charge can apply to transfers to a QROPS. Where an exclusion does not apply, the charge is generally 25% of the amount being transferred.
One important exclusion may apply when you are tax resident in the same country in which the receiving QROPS is established. For example, someone who is tax resident in New Zealand and transfers to a New Zealand QROPS may avoid the charge, provided the required information is supplied, the relevant conditions are met and the transfer is within their available overseas transfer allowance.
Tax residence is important. It is not determined simply by citizenship, owning a home or spending a short period in a country. Your position will depend on the residence rules applying in the countries involved.
What could happen if you leave New Zealand?
The same-country condition is not considered only on the date of transfer. A later change in your tax residence can also matter.
If you transfer to a New Zealand QROPS while tax resident in New Zealand but become tax resident in another country during the relevant period, the condition that originally excluded the transfer from the charge may no longer be met. Unless another exclusion applies, an Overseas Transfer Charge could then become payable.
For example, if you relocate to Australia and become tax resident there while your pension remains in a New Zealand QROPS, you would no longer be a tax resident in the same country as the scheme is based.
The relevant period runs until the end of five full UK tax years after the transfer. Because the UK tax year ends on 5 April, this can be slightly longer than five calendar years, depending on the transfer date. Changes in residence may also need to be reported to the relevant pension scheme administrators or managers.
This does not mean you cannot move again after transferring. It means the potential consequences should be understood before your plans are finalised.
Larger transfers and the overseas transfer allowance
The overseas transfer allowance is particularly important for people with larger pension balances. The standard allowance is generally £1,073,100, although the amount available to an individual may be different.
Previous overseas transfers and pension benefits taken before 6 April 2024 can reduce the available allowance. Some people may have a different allowance because they hold valid UK pension protection.
Even where the same-country exclusion applies, the part of a transfer above the person's available overseas transfer allowance may still be subject to a 25% charge. Transferring from the UK to a New Zealand QROPS does not, by itself, make an unlimited amount free from the charge.
Questions to consider
You may not know exactly where you will live in five or ten years. However, it can be helpful to consider:
How likely are you to remain in New Zealand during the relevant period?
Could work, family or lifestyle plans take you elsewhere?
How much overseas transfer allowance do you have available?
Would transferring remain appropriate compared with leaving the pension in the UK?
Seek advice before transferring, and before moving again
A UK pension transfer should be assessed in the context of your pension benefits, financial goals, tax position and longer-term plans. The fact that a transfer can be completed does not necessarily mean it will be appropriate for everyone.
It is also important to seek advice before making a major relocation decision after a transfer. Reviewing the position before your tax residence changes may give you time to understand the possible UK, New Zealand and destination-country implications.
If your long-term plans are uncertain, Pension Transfers can help you understand the options and questions to consider before making a decision.
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.
