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NZ Tax Bill Introduced - UK Pensions

NZ Tax Bill Introduced - UK Pensions

Old May 25th 2013, 10:38 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

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Old May 25th 2013, 9:34 pm
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by Tango1 View Post
Do you know how do I stand, I transferred my pension just over 5.5 years ago, put it into a QROPS .... will I be liable for any tax payments?
Hi Tango1,
You haven't stated when you arrived and then when you made the transfer. This is the important fact required to assess if tax is payable. If you made the transfer while you were transitional resident (i.e the first 4 years from arriving in NZ) then no tax should be payable.

For all ex-pats in the same position, visit a suitable accountant who specializes in this area of tax and confirm your position. For about one hours cost, you will have complete piece of mind.

Please remember this thread is based on a Bill presented to NZ Parliament and is not yet law.
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Old May 25th 2013, 9:47 pm
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Default Re: NZ Tax Bill Introduced - UK Pensions

We've been here coming up 5 years now & not done anything about transferring pensions yet, think I'm guilty of being a bit head in the sand about it so far, but also I'm not able to say with any confidence which country I'll be living in when I do eventually retire. What are the implications if we transfer our UK pensions to NZ now......... then in 10 years time decide that we want to return to the UK?
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Old May 26th 2013, 1:18 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Thanks for that, we arrived in 2007 and I transferred pension over once we had residency so about three years later.

Originally Posted by chc4me View Post
Hi Tango1,
You haven't stated when you arrived and then when you made the transfer. This is the important fact required to assess if tax is payable. If you made the transfer while you were transitional resident (i.e the first 4 years from arriving in NZ) then no tax should be payable.

For all ex-pats in the same position, visit a suitable accountant who specializes in this area of tax and confirm your position. For about one hours cost, you will have complete piece of mind.

Please remember this thread is based on a Bill presented to NZ Parliament and is not yet law.
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Old May 26th 2013, 1:53 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by Tomsk View Post
We've been here coming up 5 years now & not done anything about transferring pensions yet, think I'm guilty of being a bit head in the sand about it so far, but also I'm not able to say with any confidence which country I'll be living in when I do eventually retire. What are the implications if we transfer our UK pensions to NZ now......... then in 10 years time decide that we want to return to the UK?
Hi Tomsk, another very good question. I'll try to answer briefly but keep in mind there are a number of advantages and disadvantages for your scenarios and these should be talked about in person. Briefly:
  • Transfer to NZ now = 15% of the pension amount subject to tax. (approx 5% tax on the value of the pension). Then no tax at retirement. May also include the ability to withdraw 100%^
  • Leave it in the UK, retire in NZ = Tax at retirement on ALL withdrawals.
  • Transfer to NZ, retire to another country (Except UK) = tax now, no tax at retirement, ability to withdraw up to 100%^
  • Retire in the UK = A number of options including ability to transfer back to the UK into a stakeholder pension or similar. Not possible to transfer back to a Final Salary scheme.

All pension transfers are subject to the Qualifying Recognised Overseas Pension rules (QROPS). Once you have lived outside of the UK for 5 tax years, you are effectively no longer subject to the strict requirements imposed by the UK. This means you have more flexibility in what you can do with your pension.

^ subject to conditions.

Last edited by chc4me; May 26th 2013 at 1:57 am.
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Old May 27th 2013, 3:45 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

HI,
We are due over in September . My husband is a police officer who is due to retire in July and has a smallish private pension to top up his police pension, which is about to be invested into an annuity. Should he look at transferring it directly into NZ? Also, how does this work with final salary schemes like his occupational pension?? Thanks in advance
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Old May 27th 2013, 6:01 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by qssue View Post
HI,
We are due over in September. My husband is a police officer who is due to retire in July and has a smallish private pension to top up his police pension, which is about to be invested into an annuity. Should he look at transferring it directly into NZ? Also, how does this work with final salary schemes like his occupational pension??
Once a Pension turns into an Annuity, it is locked into that arrangement and can not be changed or transferred. If he turns it into an Annuity before arriving in NZ or at anytime in the first 4 years, then the income will be tax free in NZ. He will need to notify the Annuity provider that he now lives overseas so that tax is not deducted in the UK. After 4 years, he will have to pay tax in NZ on the income he receives.

For Final Salary schemes, he can request a Cash Transfer Value, this is a special calculation and takes into account the amount the Pension company expects to pay out over your husbands lifetime. The value can often be 10 to 20 times the annual income. This CTV belongs to him and is passed on to his dependents on death which is one advantage of the NZ rules. BUT he would be giving up the security of the Annuity, and that security is a major factor for many retirees. Do this in the first 4 years, tax free. Importantly, no tax on withdrawals. Lots of pros and cons, more than I can write here.

Seek advice and know your options before committing either way. Good luck with move and welcome to NZ!
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Old May 28th 2013, 6:05 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Thanks for your advice.
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Old May 28th 2013, 7:21 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

He is a bit good isn't he.

He does this for his living y'know , so anyone out there might want to think to take a punt.

I've no connection at all and have never met him . We moved our pensions with someone else a while back BUT I do think that someone willing to give their free time pro-bono in this way to BE members is certainly worth a look.
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Old May 28th 2013, 1:01 pm
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by chc4me View Post
The tax bill is aimed at clearing up a complicated area of tax that has been misunderstood and/or misinterpreted. This thread is for migrants and returning Kiwis that hold private pensions in the UK, or those that have transferred their private pensions to NZ. It is not about State Pensions.

First, it is important to understand the current tax arrangements in both countries so that we can compare the two.

Tax in the UK is not paid during the savings period, however at retirement tax is paid on the income received (commonly called an Annuity). This gives a tax advantage during the savings period but means paying tax in retirement.

NZ is the opposite. Tax is paid during the savings period, but not withdrawals from retirement savings. This provides an advantage in retirement and a potential advantage to migrants looking to retire in NZ.


OK, on to the Tax Bill and those that will be affected. There are three main groups as below.


1) New Migrants
Most new migrants have a four year tax exemption (named Transitional Resident) on overseas income which includes private UK Pensions. This category have an advantage. If a new migrant transfers their pension to NZ within the four year exemption, then no tax is payable on the transfer.

This gives a 4 year window to make the transfer without paying any tax. However once the funds are invested in a NZ scheme (QROPS), the scheme will pay tax on the investment returns. When it comes time to retire and make withdrawals, no further tax will be deducted from the payment. A huge financial advantage if close to or over age 55.

Questions?
We will be new migrants (visa's being issued this week) who have already retired, we both have SIPPs, OH has started draw-down, I have not.

So if I understand correctly, for both of us, we can transfer our SIPPs still invested in a QROPS within the 4 year transfer window, then the QROPS will pay tax on the investment returns and we can draw down income tax free?

Thanks - you are brilliant!
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Old May 28th 2013, 9:47 pm
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by wendy_woo View Post
Thanks - you are brilliant!
Well thank you for your kind words.

Don't forget to tell your pension companies when you permanently leave the UK and that they should not deduct tax from any draw-down payments. You are liable to tax in NZ on the draw-down payments AFTER 4 years. In other words the first 4 years = no tax, transfer your pension savings to NZ just before the end of the 4 years and then no tax in the future either !!! (Yes you are right, pay tax on the investment earnings once it is in NZ). You really are in a great position. For more info read this link from the UK tax office "Tax when retiring abroad".
Allow 6 months for a pension transfer (it usually takes 2 to 3 months, but 6 months allows for any delays). Good luck with the move.

Last edited by chc4me; May 28th 2013 at 9:51 pm.
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Old May 29th 2013, 11:36 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by chc4me View Post
Well thank you for your kind words.

For more info read this link from the UK tax office "Tax when retiring abroad".
Allow 6 months for a pension transfer (it usually takes 2 to 3 months, but 6 months allows for any delays). Good luck with the move.
Your welcome! Great to learn we are in such good place, seeing our FA tomorrow and picking up passports with sticker in, just need that buyer for the house and we are on our way!
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Old May 30th 2013, 6:10 pm
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by chc4me View Post
Well thank you for your kind words.

Don't forget to tell your pension companies when you permanently leave the UK and that they should not deduct tax from any draw-down payments. You are liable to tax in NZ on the draw-down payments AFTER 4 years. In other words the first 4 years = no tax, transfer your pension savings to NZ just before the end of the 4 years and then no tax in the future either !!! (Yes you are right, pay tax on the investment earnings once it is in NZ). You really are in a great position. For more info read this link from the UK tax office "Tax when retiring abroad".
Allow 6 months for a pension transfer (it usually takes 2 to 3 months, but 6 months allows for any delays). Good luck with the move.
We have NZ permanent residence and also have SIPPS. We are planning to return to NZ within the year (we have been living in the UK since 1997). We have years to go until retirement (we are 46) but it is useful to know in advance any steps we need to take. Could I ask a few more questions?

Are you saying that growth in the pension fund is not taxed for the first 4 years of residence? And that it is true whether you transfer it to NZ or not? After that you need to declare it I assume.

If we lived in NZ for a while and then began drawdown/annuity after age 55, would that be taxed in NZ? Does it matter whether the pension is in the UK or NZ?

Thanks
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Old May 31st 2013, 12:10 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by trafford View Post
Are you saying that growth in the pension fund is not taxed for the first 4 years of residence?
The first four years are tax free IF you meet the transitional resident exemption. This means if it is your first time in NZ OR you are a returning Kiwi that has been away for 10 years. You can only be a Transitional Resident once in your lifetime. I note you say you hold NZ residency and you are returning to NZ. For you, further research is required, further questioning about your particular circumstances and details about when you were first in NZ. Obviously this forum is not the right place to discuss such sensitive matters, but I trust I have pointed out that you will need specific advice relevant to you.

Originally Posted by trafford View Post
And that it is true whether you transfer it to NZ or not? After that you need to declare it I assume.
If the money is held offshore, true. If you transfer it to NZ, it can still be tax free within the first 4 years IF it is invested in a particular investment fund known as a Zero Rate PIE (fancy name, but just means the investment meets certain criteria). There are not many Zero Rate PIEs available so you should quiz your adviser about the options. If your adviser doesn't know about Zero Rate PIEs, find another adviser.

Originally Posted by trafford View Post
If we lived in NZ for a while and then began drawdown/annuity after age 55, would that be taxed in NZ? Does it matter whether the pension is in the UK or NZ?
If you continue to hold the money in the UK, then you pay full tax in NZ on any drawdown (assuming you are no longer a Transitional Resident). If you transfer the pension fund to NZ, all draw downs are tax free (subject to earlier posts about tax on growth).

Last edited by chc4me; May 31st 2013 at 12:13 am.
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Old May 31st 2013, 8:29 am
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Default Re: NZ Tax Bill Introduced - UK Pensions

Originally Posted by wendy_woo View Post
We will be new migrants (visa's being issued this week) who have already retired, we both have SIPPs, OH has started draw-down, I have not.

Thanks - you are brilliant!
New Question! OH has a SIPP with a small amount vested to enable him to draw down, the remainder is still not vested, can he move the vested amount to his QROPS, as well as his non vested, if not what are his options for the vested amount?

thanks!
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