If there is any chance you may return to live in the UK, then you should leave your pension benefits where they are.
Everything you need to know to make your decision can be found below.
You will need to write to or preferably email your UK pension provider and request a Cash Equivalent Transfer Value (CETV). This is the first step in considering if a pension transfer could be the right option for you.
For a money purchase scheme this is quite straight forward as your funds will most likely be invested in a unitised fund which is valued on a daily basis.
For a defined benefit scheme, the calculation is a lot more complicated and requires an actuarial calculation of the regular pension you would receive in your retirement capitalised as a one-off lump sum payment.
Your provider will then send you this valuation together with forms required to transfer to a QROPS.
Requesting a valuation does not commit you to any action at this stage.
You also need to consider the length of time that you have been a tax resident in New Zealand.
Transferring pension benefits within the first four years of your residency in New Zealand will normally mean that your UK pension will not be subject to tax in either the UK or New Zealand.
After the four-year period there will be an increasing foreign superannuation tax liability for each tax year you have resided in New Zealand.
We can refer you to an appropriate tax adviser to help you establish your potential tax liability before you make the decision to transfer or not.
Your pension benefits in the UK will have been accumulated by being a member of either a money purchase scheme arrangement such as a Personal or Group Pension Scheme, or a defined benefit scheme.
Transfer of a money purchase scheme is relatively straight forward as you will be transferring from one managed investment scheme in the UK to a managed investment portfolio in New Zealand.
However, the transfer of pension benefits from a defined benefit scheme (also known as a final salary scheme) requires much greater analysis. This is because defined benefit schemes provide a lifetime guaranteed income based on a cash value, and you will be transferring this amount to a managed investment portfolio in NZ with a level of uncertainty around potential returns.
Because UK pension transfer analysis is complex, the Financial Conduct Authority (FCA) in the UK requires clients wishing to transfer their defined benefits to a New Zealand superannuation scheme to engage with a UK-regulated adviser.
This approved UK adviser can compare the UK benefits being surrendered with the perceived benefits of investing a cash lump sum in a New Zealand superannuation scheme. This is a highly specialised area of financial advice and we will help you work with an appropriate firm of UK advisers who can provide this service to NZ residents.
Transfer costs should be a major consideration as you do not want to lose a large proportion of your transfer value in fees.
Clients with defined benefits will have the additional cost of engaging with a UK adviser to provide an Appropriate Pension Transfer Analysis. This is a UK regulatory requirement and the fee is in the region of £3,500 so is a considerable cost. In order to ensure that the pension transfer process is as cost-effective for you as possible, avoid additional adviser fees where initial transfer fees quoted can be as high as 5% of your total transfer value.
Most of the Qualifying Recognised Overseas Pension Schemes (or QROPS) in New Zealand are proprietary scheme arrangements, meaning you are restricted to an often very narrow choice of investment options offered by the funds management company.
Unlike these product providers, Hamilton Hindin Greene only recommends superannuation schemes which provide a custodial service giving you access to the full universe of investments including UK-listed investment trusts, direct equities and bonds, and low-cost exchange traded funds.
This typically means that not only are your holding costs lower compared to being invested in a managed fund, but you can create your own bespoke portfolio of world-class investment assets.
Jeremy Simpson has spent nine years as the pension transfer specialist for a national firm of financial advisers. He holds the Advanced Financial Planning Certificate (G60) in Pensions from the Chartered Insurance Institute and spent four years working in London as a broker for pension firm Clerical Medical Investment Group.la
Investment Adviser | BA. GradDipBus (PFP)
Director / Investment Adviser
You’ll need to request a Cash Equivalent Transfer Value (CETV) from your UK pension provider. Your provider will provide you with a valuation and the forms required to transfer your UK pension to a QROPS. This is a no-obligation request. Contact Jeremy if you’re unsure what to ask for.
Yes, after age 55, which is the earliest retirement age for a New Zealand ROPS you can access 100% of the transferred fund, subject to any early withdrawal penalties and withdrawals are regarded as tax paid, so no further tax to pay as an individual tax payer
UK pension providers vary widely in the speed of their response to transfer
enquiries, and even in the methods they are willing to use to transfer funds –
but most transfers take around three months. But depending on the requirements of the transferring scheme, requests for additional information can sometimes extend this timeline by a number of months. We do our best to expedite the process, couriering documents to the UK, and calling to confirm receipt of documents and
for frequent progress reports.
You can hold the majority of UK pension schemes in pounds sterling with our preferred New Zealand pension schemes, until you are ready to implement your investment strategy. Please note that under NZ tax laws currency gains made are taxed within the pension fund whilst losses can be offset.
No – most pensions can be transferred any time as long as you have not yet purchased an annuity. But you may want to consider transferring during the 4-year tax exemption period for new migrants and returning New Zealanders if they have been away from New Zealand for more than 10 years, as it may be tax advantageous to do so. Please click here for an explanation of the tax rules for foreign superannuation lump sums.
No, KiwiSaver Schemes have lost their QROPs status on 6th April 2015. They have been removed from the HMRC list of QROPS schemes. QROPS Schemes must not allow any withdrawals prior to age 55 apart from ill health. As KiwiSaver schemes do allow withdrawals for financial hardship, permanent emigration from New Zealand and first home buyers before that age, their QROPS status has been removed.
Most New Zealand QROPS have limited investment choice, but our preferred schemes allow you to select from literally thousands of investments, including cash, stocks and shares, managed funds, fixed interest investments, listed property trusts and UK investment trusts. We work with you to design a portfolio of investments within your pension scheme that helps you to reach your goals but also to ensure that you are comfortable with the investments recommended.
Monitoring reports will be sent out quarterly and a formal review of your portfolio is recommended on an annual basis. Your adviser can be contacted at any time for more frequent reviews of your investment portfolio or to make changes as considered necessary.