Are you a UK expat planning to move to New Zealand? Or perhaps, an expat Kiwi returning home from the UK? There are many valid reasons to consider transferring your UK pension to New Zealand – but there are also a few things to be aware of.
Over 20-plus years, our team at Pension Transfers have helped hundreds of clients transfer their UK pension, and we can assist you in making an informed decision for your financial needs. Here’s a helpful summary to get the conversation started.
What is a QROPS?
You may have heard this term before. A QROPS (Qualifying Registered Overseas Pension Scheme) is a pension plan outside of the UK that has been approved by the UK government. To transfer your money to New Zealand, you need to move into an NZ QROPS.
QROPS come in many forms: they can be self-administered pension schemes, managed funds, or investment platforms.
What’s the process?
Generally speaking, to transfer your UK pension to an NZ QROPS, you need to send a written notice to your UK scheme administrator. Within 30 days of receiving your notice, the administrator should let you know the current value of your pension scheme and send through relevant documentation for your transfer.
As straightforward as this may sound, this is where the process can get complicated and lengthy (between two and six months), so it’s important to have a UK pension transfer expert in your corner who can guide you every step of the way. Click here to learn more about our Transfer Process.
Why transfer your UK pension?
Under current rules, there are many benefits to transferring your UK pension to New Zealand. For example:
- Tax-free window: If you complete your transfer within four years of becoming a NZ tax resident, you can transfer your UK pension without any NZ tax obligations on the lump sum.
- Estate planning: You can have confidence that your pension will remain in your Estate for your loved ones. On your death, the balance of your pension will be transferred to your Estate, tax-free, without having to pay the UK inheritance tax.
- Investment oversight: You can manage the investment of your funds through your chosen QROPS or in combination with your KiwiSaver plans, regaining control of your retirement planning.
- Reduced exposure to volatility: You’ll be less exposed to fluctuations in currency exchange rates, provided you manage the transfer and currency exchange in two or more steps (we’ll get to this in a second).
What are some common risks to be aware of?
As we’ve seen, a UK pension transfer can make financial sense, depending on your circumstances. But the process can also be quite complex, amid ever-changing rules and complicated jargon. Again, having an expert in your corner can make all the difference, helping you avoid some common risks like:
- Tax implications: If you’d like to take advantage of the four-year tax exemption period, timing is crucial. If you transferred after this term expires, the tax payable on the transfer could range between 4.76 per cent and 100 per cent of your pension value.
- Wrong timing on currency exchange: Many people do the transfer and exchange rate in one go, losing control over when their money converts from GBP to NZD. To maximise your pension funds, you can choose to transfer your UK pension to New Zealand in GBP, and wait for a favourable exchange rate to convert to NZD.
- Losing some benefits: If your UK pension scheme includes benefits like pensions for your spouse and dependents, insurance coverage, and minimum pensions, you may lose them by transferring your funds to New Zealand. Get in touch – we can help you get a clear understanding of the pros and cons.
Get in touch: we’re here to help
If you’re moving back to New Zealand from the UK, then transferring your UK pension to New Zealand is worth considering – and getting professional advice is key. Give us a call on 0800 UK 11 NZ to book a meeting, or learn more about UK Pension transfers here. We look forward to assisting you.
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 development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.