UK Pension Transfer To NZ

Transferring a UK pension to New Zealand can be complex. In addition to possible tax consequences in both countries, other pension benefits may need to be considered. This complexity underscores the importance of seeking professional advice.

For many NZ residents with overseas pensions, there is an opportunity to combine historical tax-free growth in their UK pension with future tax-free distributions once they have been transferred to NZ.

Below are important considerations when deciding whether to transfer a UK pension to NZ:

NZ Tax

NZ Tax on UK pension income

If you choose to receive a periodic pension from the UK, this will be taxed in full by NZ IRD and must be declared as income. This may require you to file a tax return each year.

Tax on pension transfers or lump sum withdrawals

You may need to pay NZ tax if you transfer or withdraw a lump sum from a foreign superannuation scheme.

A four-year tax exemption period generally applies, and if you receive a lump sum during that time, you won’t be required to pay NZ tax on the amount you receive.

After that four-year exemption, the tax you pay may increase each year.

Transitional residency

A’ Transitional Resident’ status can benefit new migrants or New Zealanders moving home after a significant period of living overseas. Foreign passive income is exempt from tax for 48 months if you qualify.

This includes withdrawals from foreign superannuation schemes by taking lump sum benefits or transferring to a NZ superannuation scheme. The exemption also includes income from financial arrangements, rental property, and FIF income.

UK Tax

UK Pension Transfer To ROPS

To transfer a UK pension tax-free, the receiving scheme must be a Recognised Overseas Pension Scheme (ROPS). A ROPS is designed to meet the UK government’s specific criteria, ensuring compliance and tax efficiency.

One important point is that KiwiSaver schemes cannot qualify as ROPS. This is because KiwiSaver schemes allow withdrawals for purchasing a house, making them ineligible for ROPS status and, consequently, not tax-efficient for transferring UK pensions.

For optimal tax benefits and compliance, ensure your pension transfer is to a qualified ROPS.

Overseas Transfer Charge and Lifetime Allowance Charge

The UK has complex rules around taxing pension transfers. Heavy taxing can occur, e,g. The OTC is 25%, and the LTA is 55%. But don’t be too concerned as there are exemptions for both rules, which apply to many people transferring pensions.

Other Considerations

Death Benefits

Death benefits may be better in NZ than in a UK pension plan. Some UK Annuities may restrict death benefits, such as guaranteed payments for a limited period. A key advantage in NZ is that superannuation schemes have no inheritance tax; therefore, any assets will be fully available to beneficiaries.

Access to funds

The NZ ROPS allows penalty-free access to your funds from age 55, although this age will increase to 57 on 6 April 2028. This is the same as the UK for defined contribution schemes.

Risk of regulatory change

Once funds have been transferred to New Zealand, they are unlikely to be affected by additional UK tax rules. However, if you opt to leave your pensions in the UK, there is a risk that changes to how transfers are taxed could negatively impact your situation.

How do we help?

Our experts ensure you receive the best possible advice, enabling you to make informed decisions about your pension transfer.

We assess your UK pension assets and other financial holdings to determine the most effective way to structure your financial affairs. If transferring a UK pension to New Zealand is advisable, we will manage this often complex process for you.

At Bradley Nuttall, we work with a ROPS regulated by the New Zealand Financial Markets Authority, offering various investment options, including managed funds, shares, and property.

Our financial advisers provide tailored advice to ensure your retirement plans align with your lifestyle and financial goals.

With 14 years of experience in the UK financial markets, Cameron is well-equipped to evaluate whether a UK pension transfer is right for you. Contact us today to schedule a consultation and confidently begin your retirement planning.

Book an appointment for our no-fee initial consultation and UK pension plan evaluation.