Tom1983

Ok, this is very confusing!!!

I've got a pension back in the UK from my previous employer that I was hoping to transfer over once I obtained residency. That way I was hoping to put it in my company pension fund or Kiwisaver (I think my employer uses KiwiSaver).

Should my other half and I immediately transfer our pensions over once we've obtained residency then? I'm struggling to understand as we've only been here for 9 months.

Or am I missing the point? I don't know, pensions isn't my stronghold in finance!

chc4me

Hi Tom,
Welcome to NZ, hope Christchurch is treating you well. With regards to your question, it is answered in the above posts i.e if you transfer your pension within the first 4 years no tax is payable. This is specifically written in the proposals. Having said that, it is only a proposal and not yet law, so things could change between now and then.

Genesis

Were we sold a lemon with QROPS???? I have been to my Police Pension provider and they have told me they have no valuation system for the pension on an annual basis......just the end figure, the AVC company can give you a year by year valuation, but only for the last 3 years. However my QROPs provider appears to be wrong from what Chchme has said re the taxation being on the amount of increase from the end of the 4 year period to the date you cashed it in. It just gets clearer eh? Apparently the taxation is going to be on the whole lump sum!!!! Can you imagine how much that might/could be??????????????????????????????????????????

May I sugget we all (those who are affected) do what we can to stir this up? I am going to see my local labour MP next week and have the Dom Post looking at it today.

What about the TV progs Fair Go and Target? I have a 100% honest held belief (as does Kate)that we were sold this QROPs as a 100% tax free vehicle so long as QROPs rules were followed. No 4 year transition period was ever mentioned in the sign up or explanation..just the FULL 5 year period out of the UK afore you could have your 49%. From what I can see we have been misinformed. Neither Kate or myself would have embarked upon this had we thought here was the slightest chance of any taxation.

Am I wrong or am I right about QROPs being sold as 100% tax free in BOTH NZ and the UK?????????????

RachelG12

I'm really confused. So if you transfer your pension in the first 4 years that you're in NZ, then no tax? Or just no tax for those first 4 years? Need to
look into transferring my NHS pensions for when we come over in January x

chc4me

Correct!

Also correct. If you are a new migrant, then you have a 4 year tax exemption. It is the IRDs view that Pension savings held in the UK should be declared and tax should be paid each year after the exemption.

The proposal that has been released by the Policy Advice Division of IRD is suggesting that foreign pension transfers and/or withdrawals should be taxed.

The biggest issue is the retrospective natue of the proposal which could result in some very large tax bills.

Genesis

But how could the IRD tax me on something that the provider has no value for? They can only give me a final value on the main one the day it was cashed in. Say someone has a final value of $155k am I right in thinking it could be around a 30% tax bill on the full $150k? If that is the case we are soooooooooooooooooooooo going to lose out and I would probably leave the country as I am not paying around $90k betwixt Kate and myself on something that was sold to us as tax free. It makes transferring your pension a total and utter waste of time if this goes through. A bit like coming to NZ from a fiscal point of view because at this rate between the finance co and the IRD they will have taken a huge swathe of our cash. NZ is beginning to look like a total disaster for us from a financial stand point.

chc4me

NOTE: We are discussing the new proposals and the tax on holding a UK Pension fund in the UK OR the tax on a Transfer to a NZ Superannuation Scheme.

A seperate topic is the tax on the investments once the money arrives in NZ. Just for clarity, once your pension savings arrive in NZ, it is invested. The manager of the investments will pay tax on your behalf based on the returns from the investments. This is the same treatment for all NZ retirement savings.

chc4me

Good question. At a recent seminar on this topic, the IRD representitive said it was the tax payers obligation to obtain an annual value and declare it to the IRD.

In your example of $155,000 the tax would depend on how many years since migration - called the inclusion rate. If you have been in the country for between 9-12 years, then 45% of the amount will be included. So $155,000 x 45% = $69,750 now tax that at your marginal rate which is most likely to be 33% = a tax bill of $23,017. Not quite what you are suggesting, but $23k is still a long way from "Tax Free" that your adviser told you!!

The inclusion rate is within the document link on the first page if you want to see the differences.

BEVS

In that respect, Genesis, you are right. Provided we followed the 5 yr rule, per Qrops ,all would be fine. No UK tax clawback at all and the NZ superannunation rules would apply to us here as they do to all NZ'ers. One found a suitable qrops registered scheme that would suit you personally and transferred over.

I'm still trying to get my head around this properly, so bear with me whilst I ramble on. I am very rusty.

What is proposed seems to stem, not from Qrops transfers as such, but more from the idea that most people with non-NZ investments overseas ,in the form of their private/occupational pension plans , do not declare any gains/loss on the tax return as taxable income.

This is the bit I am struggling with at the moment TBH . I need to understand this better Genesis. I also need to understand/remember how our 4 pension funds worked back in the UK as they were very different from each other.

Like you, this talk of a 4 year transitional period came into effect quite some time after we arrived. It wasn't around that I know of in 2004.

Further, no-one ever stated that we should be trying to declare our UK pension funds somehow on an NZ tax return & when we finally moved the funds over to a Qrops approved scheme, no mention of it then either.

As far as I am concerned ,there was no income as such to declare anyway because the plans were locked & so there was no income. There was growth & there was certainly loss but the whole idea was that pot remained untouched until one retired.

I simply wasn't aware that my personal pension plan would become tax disadvantaged by my living in NZ. All that was peddled was the so-called positives of flexibility.

I agree. This was all supposed to be free of tax. I understand that the UK plans were UK tax advantaged in that there was no capital gains or investment tax.I cannot recall anyone ever stating that these UK plans were considered taxable assets here in NZ.
To some out there, this may seem daft .

People in this country , NZ, buy property for their super-annuation. What annual tax is there on that for gain/loss in value ?
If overseas 'superannuations' are to be retrospectively taxed then the same should apply to ALL superannuation plans .For the majority of NZers around us that would include their 2nd properties which they openly name as their superannuation pot. Can you imagine the outcry!

At the point of drawing on any fund as pension , I can understand it being taxable. Taking a lump sum to invest in property I do not see as taxable. It's investment.

I've asked myself which other country would have had compulsory occupational pension schemes or the all out drive to ensure everyone started a private pension plan.

I'm not at all sure that NZ IRD understand just how the UK schemes work. I wonder that they think they simply operate as per NZ schemes.
I might have been able to obtain an annual valuation with my private pension plan but with the others I doubt it would have been possible.

The NZ scheme with which we lodged our funds, invest the money for us . We know where the money is . Any change we are contacted & are approval is required. We are given monthly statements and an end of year tax summary.
There is no compulsion to buy an annuity. It remains your money ,in a sense, to do with virtually as you please.

This is nothing like any of the UK schemes we had. Nothing !

I object to the suggestion that their ( NZ IRD) proposals is to make it simpler for us to pay them a huge wad of tax that we cannot be sure we even owe.

That the suggestion is to apply retrospectively stinks even more as for many it will be impossible to obtain the necessary valuations.

At this moment I am assuming that this sneaky retrospective tax demand proposal is on any perceived gain a plan might have made from a point after being NZ tax resident for 4 years and prior to moving the funds to NZ.

BEVS

Right But of that $155K who is to say that 45% of that final figure was all gain during the years as an NZ tax resident . From memory my plan actual decreased in value !

Further, my husband's NHS plan would not be able to state what the annual value was as that is not how it worked. It was a final salary scheme. I object to the seemingly random figure of 45% being applied.

chc4me

Hi Bev,
I'm just stating what the proposal is. The IRD have provided an explanation of the methodology used for the inclusion rate and a rather long winded formulae that would make Sparkie Down Under nod off just at the mention of formulae!

For me, the biggest issue is the retrospective nature of the proposal. If it was for ex-pats going forward, then sensible decisions can be made with all the facts available and decisions made accordingly. But to apply tax after the event is poor form.

My other issue is that the IRD appear to have conveniently forgotten the Qualifying Foreign Private Annuity (QFPA) rules which states that overseas pensions may qualify with no tax payable until retirement when tax is payable on income and withdrawals. The IRD believe that QFPA does not apply to UK Pensions because of the 25% lump sum at retirement.

I'll be making a submission along these lines and urging them NOT to make it retrospective, but I feel it's an uphill battle.

BEVS

I'm not having a pop at you mate at all. You be the messenger

Ah ! You know I was fighting shy of stating that this seems to be targeting UK plans.

The 25% lump sum thing is not automatic. Who is to say who would take it and who wouldn't.

I have this deep and growing feeling of anger , resentment and injustice. It's a feeling I don't need in my life. I also don't need to be facing having a large sum of our investments taken away from us to NZ taxation in this way. We are not of an age where we can recoup these funds.

BEVS

Yes. It stinks. I totally agree with what you have written above on all counts

This makes sense. That is what the pension pot is for. Pension income so you don't need to rely on top up benefits.

How very convenient.

BEVS

You know something? I am so very ,very worried about this. It almost makes me feel physically sick. I couldn't sleep properly because of it.

Thanks New Zealand.

Genesis

Yeah me too Bevs. Just now I wish I had utterly nothing to do with NZ. We bring our money here, incentivised on a tax free basis to invest and spend here then they shaft you oh so royally in this way. I am utterly seething..more so than with Hanover as these people are setting out to take our money when we knew nothing about it in such an unfair manner.

As Chme says it is the retro taxing..how can that be fair? You cannot make BIG decisions without all the facts. I for one will most likely be looking for another country to reside in if they go ahead with this as it is soooooooooooo BLOODY UNFAIR!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!