Genesis

Right, I have for the 3rd time in the last 2 years asked the IRD (who referred it to their technical team) who have for the 3rd time told me that UK endowments are not NZ taxable, from the horse's mouth X times.

I have done my bit, I even wrote to them with this year's IR3 telling them about it!! They are NOT interested, they have finished assessing me this year with this info and do not and will not take any tax action against these endowments.

chc4me

Thanks Genesis, That is a huge suprise that Endowments are not taxable. I really thought they would be classed as Foreign Investments and subject to the FIF tax rules. Just goes to show that tax is not an easy subject.

chc4me

The biggest advantage is for new migrants within the four year tax exemption and of retirement age. They will be able to transfer the pension savings to NZ and pay no tax on ANY withdrawals EVER. This includes the lump sum (which has increased to 30% rather than 25%) and the annual income.

chc4me

Hi Frenchy,
It might depend on when you arrived in NZ. If you are within the 4 year tax exemption it could be worth considering. If you leave the fund in the UK and take a lump sum at retirement, these new proposals would create a tax on the lump sum that you mentioned.

The NHS Pensions are very good retirement plans, so make sure you seek good advice.

scrubbedexpat094

Thanks for that information Genesis. I was worrying about this overnight.

chc4me

Under existing rules, if your total pension savings are less than $50,000 (NZD), then you are exempt from the FIF rules and therefore not required to declare for tax purposes.

Under the proposal, I can't see any mention of the $50k minimum so assume it will capture all amounts. Think I might add that to my submission to include a minimum.

chc4me

Vital - Thats good news from Genesis. I think obtaining it in writing from IRD is a good idea too .... to cover yourself if they ever change their mind

scrubbedexpat094

Yes I was thinking that. Will get on to it.

Many thanks for all your input too, it has been most helpful & is much appreciated by myself & I'm sure others feel the same.

You're a

RachelG12

I'm coming over in January and now really don't know what to do re: pension. I do intend to stay, however you never know what will happen. Is it better to leave it in the UK (NHS pension), or transfer it within the first 4 years?

As long as I declare it on Tax return once a NZ Taxpayer, does it make a difference when I transfer it?

#bangingmyheadaginstabrickwall

chc4me

Tax is only one consideration when making such decisions. You will have a four year exemption so plently of time to decide. These new proposals appear to make it more favourable to transfer within the first four years but make sure you understand the pros and cons of transferring or leaving it in the UK.

Genesis

I don't think I will bother. I understand that the IRD can do what they like as this back peddling with QROPS proves. Their written word means nothing. I have it on my records held by the IRD that this question has been asked 3 time verbally and once in writing..that will do for me. If they decide to change their minds in the future nothing will make it better. They do as they please eh?

julesnye

chc4me, as you work in finance, what would you say are the main pro's and cons with regards to transferring pensions or not? this is only your opinion not written in Blood.

chc4me

Pros of Transferring:
More flexibility / More Control over pension savings / No IHT / No Annuity rules / the pension account is yours on death / ability to withdraw lump sums including up to 100% / No tax on withdrawals from a NZ scheme / leave it in the UK and you have to pay tax on any lump sum withdrawal and on the annual income / reduce concern that your UK scheme is 'in deficit'. / reduce the likelyhood of future pension changes and age increases / Interest rates in NZ are higher therefore investment returns might reflect this.

Cons of transferring:
The pension benefits you are giving up might be better than investing it yourself / Final Salary schemes tend to be inflation linked so are valuable if you live a long time / Tax is payable on the pension earnings in NZ / Fees charged for transferring and managing the investments (although there are fees on investments in the UK too) / not sure if you will stay in NZ.

I haven't mentioned Currency as there are solutions to manage the currency. Some of the factors to consider before making a decision to transfer will be generic, some will be specific to each person. There may be other factors to add to the Pro or Con lists, but in my mind, these are the main ones.

Hope that answers the question

Genesis

Here is our stance. We chopped ours in for a number of reasons. The 1st was it was TOTALLY tax free...that appears to be looking like a joke, but at the time it was tax free.

Point 2 was the fact that Northants Council are the payers of my pension. I doubt that in 6 years they will be able to pay me. Don't say they have no choice, if the money's not there it aint there. So we went for a bird in the hand. You only have to see what happened around the world 2007-2008 and see that ought is possible.

We also were informed that in the event of either of our deaths the remaining one would only get half the other's pension. We did not want that on the table.

We also were aware that had we left them in the UK we drew them from age 60 we would have had to pay what ever our prevailing tax rate on ALL the monthly pension. We did not want that either.

We had no real need for the money but for example if you have a mortgage (or part of it) that could be paid off with the 49% you get (after being out of the UK for 5 full tax years) that is ahuge bonus and all fiscal wizards say pay off your debt ASAP.

The downside of it were taking a hit on its value from an early redemption, having to pay the company who moved it (you can do it yourself apparently) and the final one that we will never know is how much more would we have got if we had drawn it if we lived to 96 (assuming the provider could afford to pay).

chc4me

Good post Genesis. Just one point, the early withdrawal has been removed for new transfers from 6th of April 2012. The UK authorities have made it a requirement that age of 55 for all NZ schemes is the minimum retirement age and no withdrawals before this age. If you are in a scheme before April 2012, then the rules might be different.

I make this point so that those reading this thread understand that the rules around pensions has changed.