Genesis

FYI alas we all have to declare 50% OF ANY LUMP SUMS from a QROPs pension as from the 1st April 2011 for the calculation of a family's income regarding how much Working For Family Tax credit you will get if you are eligible for that.

When I tried to see if there was ANY similar change on the 'totally tax free status' on which was the understanding that I moved these pensions from the UK to NZ under the QROPS scheme the IRD got very, very cloak and dagger and said 'we need more info'.

I only have the names of the 2 pensions (public sector and personal) and that they were moved under an NZ approved QROPs vehicle. They are still unable to confirm it is tax free (they did about 8 months ago when I asked them). How hard do they want to make life????

Please can anyone confirm that an ex UK pension, QROPs moved, lump sum pension is free of NZ taxation on the understanding ALL criteria for the scheme have been met? Cheers.

We have a HUGE tax bill coming if they have changed the goal post on this one too.

The woman I spoke to at IRD said she had never ever heard of QROPs..worrying innit?

Genesis

BTW there is a cut off from April 2012..apparently you can't do QROPs after that point. FYI.

Clappy

I don't think that it is the case that you won't be able to do them any more but HMRC back in the UK are changing the rules to extend the 'reporting-back-to-them' period from five years to ten years.

I think they are also tightening up the rules a bit because they have noticed that some people have been withdrawing money which was never intended.

Here's the policy statement http://www.hmrc.gov.uk/budget-update...-hmrc-stat.pdf

My understanding is that the nightmare scenario that people in NZ that still have money in a UK pension is that that money will be taxed in NZ as a Foreign Investment Fund (FIF). Once the money has been moved to an NZ investment then the FIF rules won't apply to it any more.

I did read a news item at the end of last year which suggested that IRD in NZ were reviewing the way that overseas pension schemes are to be treated for tax purposes. The report suggested that IRD would be reporting again in the New Year but I haven't seen anything about this since.

Genesis

Re the last paragraph the IRD ARE thinking of taxing ANY profit the pension fund made from the day you arrived in Nz to the day it was cashed in. How on earth will that be calculated if they decide to go with that? I got not yearly appraisal from my Police Pension Fund as to how it was faring.

AND I was sold the QROPs thingy as being totally tax free so long as all criteria were met. BTW the IRD do not and will not tax you on the LUMP SUM itself, just possibly the bit of it I mentioned above. Also you do not have to declare as 'income' for WFF tax credits 50% of the lump sum...just 50% of any interest made from the investment of said monies. They gave me crap info..pretty much as usual.

BEVS

Crike. They'd have to give me a tax refund then as my own private pension fund value plummeted .

Clappy

If you are able to use the new migrants transitional relief then I am sure that so long as you move the money over within the four years you should be OK.

The downside of the transitional relief is that you cannot claim working for families tax credit.

If you have claimed the WFF then transitional migrant relief does not apply and under the current rules you will be stuffed with a big tax bill. The IRD here seem to be much more on top of tracking this sort of thing down than HMRC were back in the UK.

As I mentioned earlier, I did read that the IRD were reviewing the position and going to report again in the new year but I've heard nothing about it since.

I have left my pension money in the UK because I couldn't bear to convert it at the exchange rates that have prevailed over the last three years but I will have to do it before December and the exchange rate has not stopped getting progressively worse.

Genesis

You don't have to cash it in so long as it is over $20k. We have a load of our UK pension sitting in an NZ bank in sterling. Alas there is no interest but it is safe and out of the UK.

If the ruling goes against us we will have to pay our prevailing tax rates on whatever the fund went up on the day we arrived to the day it was cashed in. Who knows there may not be such a big bill to pay. Quite how we will find out said growth in that period is beyond me..you don't get yearly updates for police and nursing pensions!! Even if we do have to pay tax we both got twice the pay out we were expecting/hoping for! So its swings and roundabouts. With regards to the 4 year tax break we missed that...right result as it happens as WFF tax credits has bought in waaaaaaaaaay more momney than any tax saving on off shore monies we have.

I also have a $45k tax allowance that I fought for and won over my big losses with Hanover Finance. Which is nice.

chc4me

Hi Gensis,
I can confirm that the Lump Sum payment is not taxed. If you Transfer a UK Pension to NZ, you do not pay tax on the Transfer.

This should not be confused with the earnings/growth of the investments while invested through your QROPS provider. A NZ QROPS pays tax on earnings/growth of the investments, this is deducted from the over-all fund.

There was an article published in the Chartered Accountants Journal last year from one of the IRD Principal Policy Advisers which has created an issue regarding tax for ex-Pats still holding Pension savings in the UK. In short, it is his opinion that Pension savings held in the UK are to be taxed once the ex-pat has been living in New Zealand for more than 4 years. Tax is worked out by taking the value of the fund x 5% and this amount is added to the persons New Zealand taxable income.

The same policy adviser is running seminars thoughout New Zealand on this very issue, starting today. Once I have attended, I'd be happy to provide an update if you are interested.

By the way, QROPS rules are changing from 6th of April. It will no longer be possible to withdrawal 100% of the money before age 55. There appears to be some flexibility in terms of withdrawals, just not as flexible as before.

Apologies to the moderator for replying late to this thread.

Genesis

Thank you so much for taking the effort and time to explain all that to me/us.

IRD have told me that from the day that we arrived (24th April 2005, before the 4 year tax free overseas investment tax break...bloody typical!) we COULD be taxed on any growth WHILST RESIDENT in NZ from the day we arrived to the day it was cashed in. They are still making their minds up if they will do this. It is currently at a ministerial level. I wait and hope that it will go our way! Thank you again and indeed I would love an update..you are a star!!

Clappy

I, for one, would be extremely interested to hear and would appreciate it if you would give the update.

TIA

chc4me

The seminar in my city is in 3 weeks time, I'll report back then. For those looking to transfer pensions, the key dates will be the UK budget day later this month and new rules will be applied from 6th of April.

chc4me

I attended the seminar hosted by the NZ Institute of Chartered Accountants titled "Foreign Investment Funds - Your Questions Answered". For those still holding a UK Pension Fund, it is without any doubt that you should declare your pension savings to the NZ IRD.

Pension savings are taxable in NZ. If you have suffered a loss in value (maybe investments have fallen, or the value of the currency has created a loss), then it is possible to claim a refund. Many clients I know are sitting on refunds because of the way the currency has gone!

While I can hear everyone moaning "What do you mean I have to pay tax?!" there are a number of important points to note:

1) You have a 4 year exemption for foreign income and savings such as your pension fund. But talk to your accountant because if you are sitting on a refund, you may elect to waive this exemption.

2) It you declare your pension savings to the NZ IRD, then when it comes time to take benefits (the annual income), then the income is NOT TAXABLE.

3) The above applies for those that have not transferred their pensions to a QROPS and still hold a UK Pension with a UK provider.

Happy to answer questions.

Joshlin

Hi there
This has come as very timely info. We have been here since oct 2005. Our pensions are still in the UK and we have just started to think about what to do with them. Spoke to an advisor briefly today who said that due to the 10yr reporting rule just brought in no-one is currently accepting uk funds whilst terms are updated
With regards to ur comments about declaring to ird - what do you declare? Fund value or transfer value or profit / loss for the year? And given that we haven't declared them at all yet what would our tax liability be? Would we be taxed on profit / loss since arriving? Apologies if these questions are dumb - this is all foreign to me.
Cheers for any advice.

simonsi

I'd stick to taking professional advice, the sums and implications are too great IMHO to reply on forum postings....

chc4me

Hi Joslin,
Currently, pension transfers are not taking place because previous schemes do not met the requirements to accept transfers and are not registered with the UK athorities as a QROPS. The 10 year rule is only a small part of the changes.

Regarding tax: New migrants have a 4 year exemption from overseas income (such as Pensions). However, you should speak with your account as the fall in the currency may result in a tax refund (often substantial). You would declare the change in value between each year from your annual statements.

If you don't have an accountant or wish to speak to one specialising in this area, you are welcome to contact me or the NZ Institute of Chartered Accountants.

As always, do your own research first.
Regards.