Initial Considerations
We can provide help and advice on you transferring your UK defined contribution pension to New Zealand.
We can also help you transfer defined benefit pensions, although this is a lot more complicated and if your Cash Equivalent Transfer Value (CETV) is over £30,000 then you will need to pay for FCA advice in the UK, to advise if the transfer may be suitable.
The first thing to remember is that if you transfer your pension within the first four years that you become a New Zealand tax resident, you will not incur a tax liability for transferring your UK pension to New Zealand.
If you are outside this four year window, UK pension transfers can give rise to a New Zealand tax liability depending how many years you have been an NZ tax resident and therefore individual tax advice should be sourced to clarify your position.
Any funds must be transferred to a ROPS (Recognised Overseas Pension Scheme).
We also recommend that your funds are not touched within the first five years of you transferring them to New Zealand.
Of course, if it's your future intention to return to the UK, then it may not be in yout best interests to transfer your benefits.
Drawing Benefits from a UK Pension Transfer
UK pension transfer monies can be withdrawn from age 55 (which is the UK normal pension age) or earlier in the event of a serious illness or ill health (as defined by UK law). Please note however that the UK pension age is increasing to 57 in 2028).
From normal retirement age, you can choose to:-
- make a full withdrawal of your fund
- make a partial withdrawal of your fund
- set up a regular payment withdrawal
What are the Tax Implications?
A UK tax penalty may be applicable on withdrawals or transfers made from UK pension fund transfers made before 6th April 2017 and you have not been a UK tax non-resident for five clear and complete UK tax years.
A UK tax penalty may be applicable on withdrawals or transfers made from UK pension fund transfers made on or after 6th April 2017 and you have not been a UK tax non-resident for ten clear and complete UK tax years and the transfer amount has not been invested in a ROPS for five years.
Within 5 years of transfer, more or less any changes to your account are reported to HMRC. This includes fund switches, change of address etc. Subsequently movements of address overseas and withdrawals could attract tax. After 5 UK years of transfer and you reaching age 55 (UK qualifying age) you should be able to make withdrawals tax free.
Within 10 years of the ROPS receiving your pension, all withdrawals are reported to HMRC. Any withdrawals within this period that are considered ‘unauthorised withdrawals’ could be taxable. This could include moving funds to a non QROPS country.
If you need clarity on your specific tax implications, you should seek independent tax advice.
Other Considerations
Being able to transfer your UK pension does carry lots of advantages:-
- 4-year transitional tax exemption
- you'll be in control of where the money is invested
- wide choice of funds, including in NZD and GBP
- access to funds from age 55
- death duty in New Zealand is zero rated
- on death, the whole investment portfolio becomes part of your estate and can pass on to beneficiaries
On the flip side, we cannot be responsible for currency exchange fluctuations; neither are we tax experts!
