UK Defined Benefit Pension: to transfer or not?
May 15th 2024, 9:19 pm
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UK Defined Benefit Pension: to transfer or not?
Hi all,
Would appreciate any advice or the benefit of your experience with UK company pensions, if you’ve been there, done that.
Situation:
Approaching retirement, have been in NZ for 24 years.
Have a UK Defined Benefit Pension.
Have three options:
1) Transfer it to a NZ QROPS, leaving nothing in the UK scheme.
2) Leave it in the UK and upon retirement at 65 take the monthly amount, which continues until I’m a dead parrot.
3) Leave it in the UK and upon retirement at 65 take the one-off lump sum allowed (25% of transfer value) immediately then the monthly amount, continuing until I’m off the perch.
I’ve taken tax advice from a NZ accountant who is also familiar with the UK tax system, so I’m aware of the UK and NZ tax implications of each option (they produced a comprehensive spreadsheet).
Option 1) This attracts NZ tax at 35% of the transfer value
Option 2) This attracts NZ tax at usual NZ income rates, payable annually as a tax bill.
Option 3) This attracts NZ tax at 28% of the immediate lump sum then NZ tax on the monthly amounts at usual NZ income rates, payable annually as a tax bill.
Amounts remaining in the UK scheme [as in 2) and 3)] after each of the monthly payments are removed continue to be invested so should grow a little. Also, there are continual death benefits i.e. there is a little life insurance built in (not much).
Tax adviser is sure that one form to each of IRD and HMRC takes care of the double tax arrangement, ensuring the amounts are continually paid out free of tax in the UK and taxed here in NZ.
The company is a rock-solid listed multinational in a continually profitable business and I have no fear of it or its pension scheme falling over.
Fly in the ointment could be if any tax or transfer rules change over the next 20 plus years.
Thanks for reading so far…
So, my questions if you’ve been there, done that are:
-In practice, are the tax arrangements on the monthly payment from UK company pension to a person in NZ administered as simply and easily as stated above (i.e. can they become an administrative pain)?
- What did you do, and has it worked out well for you?
Cheers and keep the wood burner stoked up this winter!
Would appreciate any advice or the benefit of your experience with UK company pensions, if you’ve been there, done that.
Situation:
Approaching retirement, have been in NZ for 24 years.
Have a UK Defined Benefit Pension.
Have three options:
1) Transfer it to a NZ QROPS, leaving nothing in the UK scheme.
2) Leave it in the UK and upon retirement at 65 take the monthly amount, which continues until I’m a dead parrot.
3) Leave it in the UK and upon retirement at 65 take the one-off lump sum allowed (25% of transfer value) immediately then the monthly amount, continuing until I’m off the perch.
I’ve taken tax advice from a NZ accountant who is also familiar with the UK tax system, so I’m aware of the UK and NZ tax implications of each option (they produced a comprehensive spreadsheet).
Option 1) This attracts NZ tax at 35% of the transfer value
Option 2) This attracts NZ tax at usual NZ income rates, payable annually as a tax bill.
Option 3) This attracts NZ tax at 28% of the immediate lump sum then NZ tax on the monthly amounts at usual NZ income rates, payable annually as a tax bill.
Amounts remaining in the UK scheme [as in 2) and 3)] after each of the monthly payments are removed continue to be invested so should grow a little. Also, there are continual death benefits i.e. there is a little life insurance built in (not much).
Tax adviser is sure that one form to each of IRD and HMRC takes care of the double tax arrangement, ensuring the amounts are continually paid out free of tax in the UK and taxed here in NZ.
The company is a rock-solid listed multinational in a continually profitable business and I have no fear of it or its pension scheme falling over.
Fly in the ointment could be if any tax or transfer rules change over the next 20 plus years.
Thanks for reading so far…
So, my questions if you’ve been there, done that are:
-In practice, are the tax arrangements on the monthly payment from UK company pension to a person in NZ administered as simply and easily as stated above (i.e. can they become an administrative pain)?
- What did you do, and has it worked out well for you?
Cheers and keep the wood burner stoked up this winter!
