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UK Pension Transfer: How do I choose a ROPS fund?

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Have you recently moved or returned to New Zealand from the UK? If you’re planning to retire here, you may be considering transferring your UK Pension to New Zealand, and specifically into a Recognised Overseas Pension Scheme (or ROPS).

But what is a ROPS, and how do you choose one that’s appropriate for your needs and goals? Here’s a summary of the key things to consider.

First of all, what is a ROPS fund?

UK ex-pats who move to New Zealand, and Kiwis returning from the UK, have essentially two options when it comes to managing their UK pension funds: retain their pension with a UK provider, or transfer the funds into a New Zealand ROPS.

Previously known as QROPS, a ROPS is an overseas pension scheme that has similar rules to UK pension schemes and therefore qualifies as a fund that ex-pats can transfer their UK pension into, as per the criteria set by HMRC.

Are all ROPS created equal?

No, ROPS funds come in different forms, and broadly speaking, they fit into three categories: Portfolio Investment Entity schemes (PIE), investment platforms, and self-administered pension schemes.

PIE schemes, for example, are the largest portion of ROPS in New Zealand and usually have standard managed fund options that are designed to meet a range of risk profiles. They’re often considered a good option for people who have more of a ‘set and forget’ approach to retirement planning.

Investment platforms, on the other hand, allow a wider selection of investment options, making them a good fit for people seeking a higher degree of flexibility.

Lastly, self-administered schemes (or single-member schemes, SMS) provide even more flexibility and are highly bespoke, but also entail more administration, and they are more appropriate for people who transfer a significant amount of money (e.g., more than $1 million).

This is just a quick summary, but it’s important to understand the detail of each type of scheme, and how they relate to your goals. Get in touch with our friendly team at Pension Transfers to learn more.

Understanding your risk profile

There’s a lot to consider when selecting your ROPS fund and provider, and that all starts with having a good, clear and comprehensive understanding of your risk profile and appetite, investment horizon, and of course, your retirement goals.

For example, ROPS funds may be conservative or even lower risk, with approximately 80 per cent of the money being invested in fixed-interest bonds and bank deposits. If your attitude and capacity for risk allow it, you may choose a more growth-focused option (mostly invested in shares), or a balanced fund (with a mix of share investments and less risky assets such as bonds and cash).

Once again, we’re here to help you assess where you stand on the risk scale and explore your investment options accordingly.

How is the ROPS scheme taxed?

In general, one of the benefits of transferring your UK pension is that you can take advantage of a four-year tax-free window in New Zealand. In other words, if you transfer your funds within the first four years of becoming a NZ tax resident, you won’t pay any New Zealand tax on the transfer. However, keep in mind that payments from NZ ROPS could attract UK tax.

Once you’ve transferred your UK Pension funds into a New Zealand ROPS, part of the growth of your investments will also be taxed, so it’s crucial to know what tax rate applies as well. While we don’t provide tax advice, we work closely with experienced tax professionals and can refer any questions you have to them directly. Get in touch anytime.

Fees, currency exchange and performance

When saving for your retirement, every dollar counts. So, besides taxation rules, it’s also important to understand your currency options and what fees the ROPS provider charges.

Some ROPS schemes offer both £ and $ denominated investments, meaning you can choose which currency you invest in. Others only offer $ denominated investments, so the money you transfer will be converted on the day it arrives. Once again, we work with reputable foreign exchange professionals who can give you strategic insight and guidance in this area.

As for fees, all ROPS funds charge a range of fees, which can include management fees, entry and exit fees, and switching fees. The key thing is to know what you’re paying and what you’re getting in return, so you can maximise your growth opportunities. Keep in mind that higher fees don’t necessarily guarantee higher returns, and past performance is not an indication of future performance. Please don’t hesitate to contact us if you have any questions.

Need help?

At Pension Transfers, based on your comprehensive risk assessment, we can help you assess various ROPS funds and providers – the differences and features (for example online account access) as they relate to your needs.

Like to know more? Click here to contact us or give us a call on 0800 UK 11 NZ.


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. Past fund performance is no guarantee of future returns.