Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Yes the first point is correct, while the second point is mostly correct.

The part... "paying UK income tax ..." is not quite right. As the two countries have a double taxation agreement, NZ has the right to claim the tax. Any person in this position needs to make their pension company aware that they are living overseas and not to deduct tax at the UK end.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

However, what if they also received a lump sum? Many UK pensions pay out a lump sum.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Just received the first contribution from my UK SIPP which I naively thought would be paid gross and, as a NZ resident, I'd pay tax on here in NZ* - no such luck, my provider has deducted a decent chunk and sent it to the UK tax authorities. Where, looking at the financial news from the UK today, it's obviously much needed !

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

This is where is gets interesting. In the UK this lump sum is often referred to as 'tax free lump sum' which makes residents in NZ think no tax is payable. Unfortunately this is not true, NZ tax is payable on the lump sum at your marginal tax rate.

However, if you have previously declared your pension savings as Foreign Investments Funds and paid tax under the FIF rules, then NO tax would be payable on either the lump sum nor on the regular pension income. If you were within the transitional resident 4 years when you withdrew the lump sum, then no tax would be payable.

The new proposals are looking at changing this. According to the proposals, tax would be payable on the lump sum based on the number of years you have been in NZ.

Tax is never a straight forward subject, but worth trying to get your head around. Or paying someone to understand it for you!

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

You should contact them, tell them the situation and ask what you need to do to have future payments Gross. Also a call to the IRD in the UK as you should be able to claim the tax back. If you have been in NZ less than 4 years, do you qualify for Transitional Resident status?

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Just got this information from Lyfords Asset management, Financial Planners, Investment and Insurance Advisers, UK Pension Transfers
Level 3, 79 Boulcott Street, Wellington:

UK Pension Transfer - further rule changes

HRMC Rule Changes of the 6th April 2012:
On April 6 new rules specifically targeting New Zealand QROPS providers kicked in, requiring those who transfer to a New Zealand provider after that date to hold 70% of the transferred amount as an "income for life", with only 30% allowed to be withdrawn at the age of eligibility. The remaining funds must buy an income for life, but there is a legitimate way around this via Kiwisaver.

Some UK Pensions fall under FIF Rules
While your returns are not taxed in the UK saving up to the age of entitlement and are taxed on withdrawal you may already fall under Foreign Investment Fund rules regarding your UK pension. In which case you need to account for tax on an accruals basis. The IRD has been cracking down on this. We recommend you discuss this with your accountant.

NZ IRD Proposed Changes:
Currently, the transfer of UK Pensions is tax free from a UK and NZ perspective. However, the IRD has put out a proposal (submissions close 30th September) that would see a certain percentage of each transfer treated as income based on a sliding scale of how long the owner of the funds had lived in New Zealand.

Those who transfer their funds across within four years of migrating to New Zealand would pay no tax, while those who have lived in the country more than 25 years at the time of transfer face having 33% of their money taken by the IRD, which would treat 100% of the transfer as income.

The IRD has offered two options for those potentially affected: apply the rules that existed in previous years, or; voluntarily pay tax on 15% of the transferred amount.

UK Pension transfers have had a number of rule changes over the last 5 years and we do recommend transferring funds before further rule changes.

Some key reasons to transfer
Both the NZ IRD and HMRC keep changing the rules.
If you die your spouse may only be eligible to 50% or less of your entitlement.
You have control of your asset.
Less influenced by exchange rate fluctuations.

Also for those who might be interested following the comments made in the NZ herald last week:

Retirement Income - shortfalls

The Financial Education and Research Centre (partnership between Westpac and Massey University) reported in August on the actual cost of living in retirement. The results are surprising, 47% do not have adequate resources for retirement, 33% are not satisfied with their lifestyle, 36% can only afford a basic standard of living.

Bear in mind for the following comments that New Zealand superannuation for a couple provides an after tax income of $550 per week.

The survey found if you want a "choices" lifestyle this means a couple in Wellington would have $750 pw to live on. They would have $100 pw to spend on recreational or cultural activities, $100 on miscellaneous goods and services. It assumes no mortgage and that you are living in your own home. It does not take into account rates and insurance costs of probably around $130 pw. To cover the shortfall between NZ Super and "choices" income including housing costs would require an additional income of $330pw above the $550 from NZ Super.

To generate an additional $330pw would require a lump sum from savings of $302,000 at age 65, assuming 3% net of tax and inflation income to age 90. If you want an additional $660pw then you need to save $604,000 etc.

A total income of $550 (NZ Super), $330 (from savings) gives a net of tax income of $45,760 pa, assuming NZ Super entitlement is still around.

The "bare basics" lifestyle is basically surviving on NZ Super, no luxuries or holidays.

The "choices" lifestyle still appears fairly basic.

We do not recommend relying on the Government New Zealand superannuation. We expect within the next 10 years means testing will be re-introduced and the age of entitlement lifted from 65 to 67, in line with other western economies.


Before anyone comments I've no allegiance to this company just that they sent this information through to me and I thought soemone might find it a good read.;)

sorry for the long post.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Got a reply from my SIPP provider telling me that UK tax authorities don't know I'm a NZ resident yet. Once they know tax will be refunded and yes, I've only just got residency, so 4 years of no tax on my overseas earnings - very handy but not very conducive to moving investments over here.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

*** UPDATE ***

The Proposals which were announced last year are now expected to be presented to Parliment in the next 3 months. The expectation is that the rules will closely follow what has been proposed. While the new rules are not yet fully known, the following should be noted:

1) If you have moved to NZ within the last 4 years, you are a Transitional Resident. Therefore no tax on overseas income (as a general rule of thumb). Transitional Resident Status can only apply to new migrants that arrived from April 2006 onwards.

2) If you transferred your Pension to NZ while you where Transitional Resident, then the changes have no effect on you.

3) If you have already transferred you pension to NZ, and do not qualify for Transitional Residency, speak with an accountant. You may be able to show losses (Most likely due to currency) and therefore may have zero tax to pay.

4) If you have not yet transferred your Pensions, and you have been in NZ for more than 4 years (ie no longer Transitional resident), then speak to an accountant as soon as possible. Like point 3 above, if you can show a loss in value in NZ Dollar terms, then you most likely will have Zero tax to pay. But it requires you to make a declaration.

5) It is expected that the new rules will start from April 2014. This will provide a window of opportunity to decide if transferring your pension is the right thing for you. Tax may or may not be payable, although it's very unlikely to be payable, due to the currency situation.

The positives from the changes: By transferring your pension to NZ, or declaring it to the IRD now, it means you will not have to pay tax on any withdrawals in the future.

The best case scenario is Zero tax. In the worst case scenario, the most tax you might have to pay is 5% of the amount of your pension value. I would expect that this will apply to a very small number of people.

Happy to answer questions if I can, but do note that the Proposals are still to be finalised.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Thank you for thinking to update us.

It's all such a worry TBH.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Hi Bev,
Let me try and put your mind at rest, using the information you have stated on these boards.
- You moved to NZ in 2004
- You moved your Pension in 2010
- The currency rate in 2004 was 0.3679 or $2.71 NZD per GBP.
- The currency rate in 2010 was 0.4613 or $2.16 NZD per GBP.

Transitional resident status does not apply. It only applies for new migrants after April 2006. Therefore we need to work out what if any tax is due.

As an example I'll use GBP 100,000 as the value received from the UK in 2010 which equals $216,000 in NZ Dollar terms.
If we now use the same value of $271,000 and the 2004 currency, then that works out to be $271,000

This is a LOSS of $55,000 NZ dollars between 2004 and 2010.

The same value has been used because this is a known amount, i.e the transfer value received from your UK Pension can be obtained from your NZ Provider (they have to keep records). The value of your Pension in 2004 may not be so easy to obtain.

As you have lost value due to currency, it is very unlikely you will have any tax to pay. You will still need to visit a suitable accountant and complete a declaration once the new rules are fully known.

The above example is using the currency rates on the 31st of March in 2004 and 2010. There may be a slight change depending on when you arrived in NZ and the date of when your pension funds were received.

Hope that puts your mind at rest.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Hi there, thanks for the update. Will the IRD contact us when it is all done and dusted and let us know our liabilities if we have any or do we have to contact them? I have already sent the IRD two letters about these pension transfers (we moved in 2005 and transferred 2010/2011), one assumes we will also have to fill in a special form? Do you know if it is set in stone now re retrospective taxation or is there a chance the govt. will still knock it back? Thank you in advance.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Laws with retroactive effects are allowed :blink: ?? That basically means nothing is safe ever. I hope that is not true.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

It is true. Most people won't appreciate the significance of that though so it will go through.

I'm glad we transferred out pensions when we did.

I fully understood the FIF taxation rules and was almost inclined to keep the money in the UK and pay the taxes that were due. I don't like the new rules but the retrospection would have made it impossible to avoid them if I hadn't acted when I did.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

Is it any wonder why some of us get very bitter about NZ? 1st the finance house scandal and now this...back dating a law that said you WOULD be tax free and now saying 'we want to tax you come to think of it' AFTER we have done the deal!!

Who was it that said recently NZ has been good to ME? Utter bollocks!! Its one rip off of huge proportions after another IMO!

And I could cite another bunch of instances where myself and my family have been badly let down whilst in NZ because of poor ethics and bad attitudes and sloppy behaviour. So sorry NZ has not been the kind, benign friend that poster eluded to.

Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
 

I have been in touch (quite a while back prepping for this eventuality) with the huge UK service provider of my pension on behalf of Plod in the UK and they have clearly stated to me that they cannot give historical values, only present ones. Have spoken to the IRD about this and I think they said they have some equation of 'guesstimating' the value back down the years using some kind of scale of whatever???? So it appears assessing what the pension was worth upon your arrival in NZ is not quite as easy as it seems.