New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
#121
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
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
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
#122
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Forgive me if you have posted this but on looking through the IRD website came across the following I thought I would share with you.
"Pension funds in the United Kingdom and the FIF rules
On 6 April 2006, the United Kingdom introduced the Qualifying Recognised Overseas Pension Scheme (QROPS). This scheme allows the transfer of UK pension funds to overseas providers that meet certain requirements.
The scheme might have an impact on New Zealand tax residents-significantly widening the tax implications if the underlying scheme rules allow a transfer of a pension to a QROPS.
The New Zealand foreign investment fund (FIF) rules explicitly cover rights to benefit from foreign superannuation schemes as a beneficiary or member. The FIF rules apply if the foreign superannuation fund is not exempt under the new resident's accrued superannuation entitlement exemption (section EX42 of the Income Tax Act 2007) or the non-resident's pension or annuity exemption (section EX43).
It's Inland Revenue's view that from 6 April 2006, the exemption from the FIF rules can't apply to resident investors to whom the de minimis doesn't apply; who aren't transitional residents and who have a beneficial interest in a UK pension scheme which will allow the transfer into a QROPS.1 All such investors have been required to account for income under the FIF regime since 6 April 2006, or since the 2006 - 07 income year.2
However, this won't apply if the individual scheme rules don't allow a transfer; impose significant "penalties" for transferring interests out of the UK scheme; or if there is a substantial decrease in the present value of any benefits on transfer to a QROPS.
In these scenarios, the beneficial interest in the UK pension scheme is exempt from the FIF rules. While there'll be no taxation before a distribution is made, the tax consequences of any potential transfer or subsequent pension payment will depend on the underlying nature of the pension scheme.
1 The exception would be if the fund could be transferred into a QROPS but only at a cost of a substantial decrease in the present value of the benefits, such as if the UK pension provider allowed the transfer but only at a substantial cost.
2 The former Grey List exemption, which applied until 31 March 2007, did not apply to an entitlement to benefit from a foreign superannuation scheme. These investments were always caught by the FIF rules."
"Pension funds in the United Kingdom and the FIF rules
On 6 April 2006, the United Kingdom introduced the Qualifying Recognised Overseas Pension Scheme (QROPS). This scheme allows the transfer of UK pension funds to overseas providers that meet certain requirements.
The scheme might have an impact on New Zealand tax residents-significantly widening the tax implications if the underlying scheme rules allow a transfer of a pension to a QROPS.
The New Zealand foreign investment fund (FIF) rules explicitly cover rights to benefit from foreign superannuation schemes as a beneficiary or member. The FIF rules apply if the foreign superannuation fund is not exempt under the new resident's accrued superannuation entitlement exemption (section EX42 of the Income Tax Act 2007) or the non-resident's pension or annuity exemption (section EX43).
It's Inland Revenue's view that from 6 April 2006, the exemption from the FIF rules can't apply to resident investors to whom the de minimis doesn't apply; who aren't transitional residents and who have a beneficial interest in a UK pension scheme which will allow the transfer into a QROPS.1 All such investors have been required to account for income under the FIF regime since 6 April 2006, or since the 2006 - 07 income year.2
However, this won't apply if the individual scheme rules don't allow a transfer; impose significant "penalties" for transferring interests out of the UK scheme; or if there is a substantial decrease in the present value of any benefits on transfer to a QROPS.
In these scenarios, the beneficial interest in the UK pension scheme is exempt from the FIF rules. While there'll be no taxation before a distribution is made, the tax consequences of any potential transfer or subsequent pension payment will depend on the underlying nature of the pension scheme.
1 The exception would be if the fund could be transferred into a QROPS but only at a cost of a substantial decrease in the present value of the benefits, such as if the UK pension provider allowed the transfer but only at a substantial cost.
2 The former Grey List exemption, which applied until 31 March 2007, did not apply to an entitlement to benefit from a foreign superannuation scheme. These investments were always caught by the FIF rules."
And what does all the above waffle mean? Why were all QROPs apparently sold as 'tax free vehicles'???
#123
Forum Regular
Joined: Mar 2008
Location: Hawkes Bay
Posts: 185
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
de mimimis http://en.wikipedia.org/wiki/De_minimis
Maybe intending immigrants should take a course of Latin before entering NZ, it would be laughable if the situation was not so worrying for those affected.
I find it hard to believe they would actually let anybody off the hook of paying tax especially when large sums of pension are involved.
I know I always begrudged having to declare my world wide income & assets to Spain & pay tax to them, when they gave me nothing in return. And I had acquired it ALL before moving to Spain.
Since I've left look at the pickle they are in without my taxes.
#124
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
de mimimis http://en.wikipedia.org/wiki/De_minimis
Since I've left look at the pickle they are in without my taxes.
Since I've left look at the pickle they are in without my taxes.
Maybe you took out more from there than you should have
#126
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
New Tax proposals have been put forward which will penalise new migrants. The proposals suggest taxing UK Pensions if you are outside of the 4 year transitional resident period. This includes the 25% Tax Free withdrawal at retirement!!
If you have been in NZ for more than 4 years, and have either transferred your pension to NZ or still have your private pension in the UK, this is a must read. There is the full proposal and a Fact Sheet at this link.
It is proposed that from the 2011/12 year:
•tax would be payable when a person receives a pension or lump sum, or transfers a lump sum to another scheme (rather than on an annual basis)
•periodic pensions would continue to be taxed as they currently are
•a portion of any lump sum amount would be taxed depending on the length of time between when a person arrived in New Zealand and when they withdraw or transfer their lump sum.
Submissions on the proposals should be made by the 3rd of September.
If you have been in NZ for more than 4 years, and have either transferred your pension to NZ or still have your private pension in the UK, this is a must read. There is the full proposal and a Fact Sheet at this link.
It is proposed that from the 2011/12 year:
•tax would be payable when a person receives a pension or lump sum, or transfers a lump sum to another scheme (rather than on an annual basis)
•periodic pensions would continue to be taxed as they currently are
•a portion of any lump sum amount would be taxed depending on the length of time between when a person arrived in New Zealand and when they withdraw or transfer their lump sum.
Submissions on the proposals should be made by the 3rd of September.
The reason I ask is that Leech and CO NZ have pointed out that there is a big difference in what will happen regarding transfers prior to 1/4/11 and those after this date.
Would my one lie in the date band prior to 1/4/11 as I started the process in2010?
Leech and co sent me a great informative e mail..can I cut and paste it here?
#127
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
I can answer that from a UK point of view, which IRD are likely to accept as the date. The UK use an "effective date" which is the date both parties agreed on the transfer. Starting the process, or requesting a transfer value is unlikely to be the date acceptable. The best date would be when the UK pension company sent you a letter to say "We are making $x payment to your QROPS scheme".
#129
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
I can answer that from a UK point of view, which IRD are likely to accept as the date. The UK use an "effective date" which is the date both parties agreed on the transfer. Starting the process, or requesting a transfer value is unlikely to be the date acceptable. The best date would be when the UK pension company sent you a letter to say "We are making $x payment to your QROPS scheme".
For the tax year 2011/2012 my tax was set at 10.5% due to my earnings being sub $6k. Do you know is this the rate I will be charged on the $50k that is taxable for my pension or will it be charged at 30% as I will have effectively 'earned' around $56k in their eyes? Or will it be set at what my 2011/12 tax rate was on my IR3, namely 10.5%.
I assume I will have to return the working for family tax credits they are about to give us as these 'new' income' amounts will totally blow us out of the water for getting said tax credits. Thank you again for all your efforts.
Last edited by Genesis; Aug 2nd 2012 at 10:28 pm.
#130
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
They will add the $50k to your actual income therefore your tax rate is likely to increase.
#131
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
And I am afraid leaving your pensions in the UK is NOT the way round this. If these proposals go thru' had we left our pensions in the UK THEN drew them come 60 time whilst in NZ we would have a VERY big tax bill.
I am sure many, many people will leave a ship that has already too few people on it.
This is going to be REALLY bad for many people and will make NZ a way less desirable place to come.
If this does get past there will be huge bills formany, many folk. And our pensions were only 30% of the way thru their lives..yet a $34k bill a VERY BIG WTF?
Thank you very much the IRD and the NZ administration.