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A UK state pension to NZ super question.

A UK state pension to NZ super question.

Old Feb 2nd 2016, 8:43 pm
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Default A UK state pension to NZ super question.

I know I should know this but I've been up most of the night.

Two pensioners are coming to permanently reside in New Zealand .They are the parents of a pal of ours & have been through the visa process and come out the other side.

What happens about their state pensions please?

1 - The still receive the UK state pension which will be frozen.

2 - They can swap that for an NZ super with NZ clawing back via the mutual agreement.


Also. What about taxation.

If they keep the UK frozen state pension I assume that NZ taxation applies. Taxed on every cent.

Can't think.
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Old Feb 3rd 2016, 12:28 am
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Default Re: A UK state pension to NZ super question.

Hi
This is what i know from a friend of mine who is a pensioner
UK pension can still be received but no inflation, they have a 4 year tax break like everyone else from day have PR then taxed at the difference between UK and NZ tax
slight adjustment will mean to fill in returns year on year will depend upon level of income though
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Old Feb 3rd 2016, 6:27 am
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Default Re: A UK state pension to NZ super question.

Originally Posted by janeyk View Post
Hi
This is what i know from a friend of mine who is a pensioner
UK pension can still be received but no inflation, they have a 4 year tax break like everyone else from day have PR then taxed at the difference between UK and NZ tax
slight adjustment will mean to fill in returns year on year will depend upon level of income though
After the 4 year tax break I would switch to the NZ pension which is higher and will be index linked (and yes taxed fully but so would th UK one be).
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Old Feb 3rd 2016, 9:18 am
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Default Re: A UK state pension to NZ super question.

Can current UK pensioners do this please?
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Old Feb 3rd 2016, 4:24 pm
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Default Re: A UK state pension to NZ super question.

Originally Posted by BEVS View Post
Can current UK pensioners do this please?
Yes. Ask for an appointment with your local Work and Income office (can be arranged on the internet). Took two days to approve, another few weeks to get the top up payment (about $100 a month depending on tax level) but still waiting for the full switch over from the UK (but blame the UK end :-)

Peter

Last edited by Kotare; Feb 3rd 2016 at 4:32 pm.
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Old Feb 3rd 2016, 7:58 pm
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Default Re: A UK state pension to NZ super question.

Originally Posted by Kotare View Post
Yes. Ask for an appointment with your local Work and Income office (can be arranged on the internet). Took two days to approve, another few weeks to get the top up payment (about $100 a month depending on tax level) but still waiting for the full switch over from the UK (but blame the UK end :-)

Peter
That's so helpful. Thanks

These two particular pensioners are the parents of a pal of ours here.

They did seek advice about pensions, understood the UK state pensions would be frozen but were not told about taxation differences, so are freaking out.

I'll let them know they can choose to switch. Should ease their minds.

I do feel for them as this has been in the planning for several years and he is an only son so important for them to be able to make this move.
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Old Feb 3rd 2016, 8:11 pm
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Default Re: A UK state pension to NZ super question.

Originally Posted by janeyk View Post
Hi
..... they have a 4 year tax break like everyone else from day have PR ....
The 4 year tax break is for "Transitional Residents and applies from the day of arrival (Not the date of Permanent residency). It applies to overseas income such as Pension Income.

It is possible to opt out of Transitional Residency, both intentionally and unintentionally, so it is best to sit down with a suitable accountant that is fully aware of the various issues. For one hour of an Accountants time, they will be fully informed of any pitfalls or issues.

They should write to the UK tax office confirming they have left the country and that no further tax should be deducted from their pension, bank accounts etc. But any income or interest will be taxed in NZ after the 4 year anniversary.

If
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Old Feb 3rd 2016, 8:30 pm
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Default Re: A UK state pension to NZ super question.

Chc4me.

I do hope you have had a quality Christmas and New Year break.

I think perhaps an NZ accountant would be best. I'll have a scout around .

Could they arrive on their UK pensions . Gain the 4 years tax exemption thing and then look to swap the UK pension for the NZ super please?
(I know it's not strictly a swap )

Sounds a bit cheeky to me but perhaps if possible it would simply be sensible.
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Old Feb 3rd 2016, 9:17 pm
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Default Re: A UK state pension to NZ super question.

Firstly, unless they have complicated income etc why waste money on an an accountant. If it is just State pension etc no need (I have been coping for many years in several countries and only have O level maths :-)

They can change to a NZ pension anytime after arriving eg 4 years after arriving if wanted. A quick back of a fag packet calculation would sort that. As an example would the (guesstimate) increase in pension of $1200 annually (plus indexation) be more or less than the NZ tax they would have to pay on the pension - unlikely.

If I qualified for the tax holiday (sob) I would run with the UK one and promptly change at the 4 year point when I lost the exemption and started paying tax on all my income.
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Old Feb 3rd 2016, 10:05 pm
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Default Re: A UK state pension to NZ super question.

Hi Bev, yes very nice xmas and new year, thank you. The NZ 4 year exemption is automatic, but they will need to complete the correct forms so that they don't pay any tax in the UK. They can elect to swap to the NZ state pension at anytime. They will need to do the maths as to which one is best for them. I have come across a few folk who don't have enough years for a full uk state pension, so swapping to a NZ one gave them quite a bit more. Each person is different.

Kotare, thanks for you comment. While a state pension is simplistic, most new migrants have other issues.... ISAs, PEPs, shares, a house to sell, a rental, other investments, and so on. All these can create issues if not fully aware of them. It's also possible to break Transitional Resident status and lose the tax free advantage. An accountant will be able to discuss such issues and possibly avoid large unexpected tax bills.
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Old Feb 3rd 2016, 10:25 pm
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Default Re: A UK state pension to NZ super question.

Originally Posted by chc4me View Post
Hi Bev, yes very nice xmas and new year, thank you. The NZ 4 year exemption is automatic, but they will need to complete the correct forms so that they don't pay any tax in the UK. They can elect to swap to the NZ state pension at anytime. They will need to do the maths as to which one is best for them. I have come across a few folk who don't have enough years for a full uk state pension, so swapping to a NZ one gave them quite a bit more. Each person is different.

Kotare, thanks for you comment. While a state pension is simplistic, most new migrants have other issues.... ISAs, PEPs, shares, a house to sell, a rental, other investments, and so on. All these can create issues if not fully aware of them. It's also possible to break Transitional Resident status and lose the tax free advantage. An accountant will be able to discuss such issues and possibly avoid large unexpected tax bills.
What makes me think you are an accountant :-) You are of course correct if they have complicated income streams. Getting UK income paid tax free is purely a matter of a few letters once the UK accepts they are NZ tax resident (one form letter for each country).

I suggest decisions on fx transfers, location of any capital, cashing in investments etc are very much a personal decision (once you recognise UK income is tax free for 4 years).

Just stirring, but if you you have any insights into UK/NZ fx rates pm me as I have a wodge to transfer this way :-)

Peter
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Old Feb 3rd 2016, 10:35 pm
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Default Re: A UK state pension to NZ super question.

Chc4me is not the Christchurch wizard and so does not have a crystal ball.
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Old Feb 3rd 2016, 11:09 pm
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Default Re: A UK state pension to NZ super question.

Hi Peter, no not an accountant, I specialise in uk pensions and investment advice so have come across many of the issues. Currency, hmmmmm Tricky! I'm sure you will declare those currency gains to the NZ IRD like your accountant advised, right? Just stirring........
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Old Feb 4th 2016, 11:53 am
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Default Re: A UK state pension to NZ super question.

I'm starting to investigate this as well.
I haven't got far down the route, but at first look HMRC say that you pay UK tax on all UK income, and (as long as you stay a UK citizen) you get a personal tax allowance.

There is an agreement with NZ which covers dual taxation - that is you don't get taxed twice on the same income. I am just working my way through this.
Edit: I note that this is actually "for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains" so no free rides there!

Temporary tax exemption on foreign income for new migrants and returning New Zealanders
This says that new immigrants and returning residents who have been absent for more than 10 years are gives some (up to 4 years) leeway (but only once in a lifetime) before having to pay NZ tax.

This seems sensible, because it gives you time to settle and decide that you want to stay long term before you go through the complexities of moving all your taxation to NZ.

As far as I can tell so far this isn't a complete tax free period as you would still be paying UK tax on your UK income.

It would be nice to spend 4 years in NZ paying zero tax anywhere in the world - this should nicely cover relocation costs - but I don't think that this is what happens. Eager to be proved wrong, obviously!

What I need now is a spreadsheet which works out the UK tax due versus the tax which would be paid in NZ (one major difference being, I think, that you don't have a tax free allowance in NZ). Yep - just looked and it starts at 10.5% in NZ. So if you are on a UK State Pension (roughly £7800 or $16500) you would pay no tax in the UK but would have pushed into the 17.5% tax bracket in NZ. In which case keeping the UK pension paid in the UK (if you can) looks the far better deal.

There must be a break point between where you pay less tax in the UK and less tax in NZ, although I suspect it may be getting towards the point where you pay higher rate (40%) tax in the UK. Unless of course the double taxation agreement means you pay the aggregate highest tax possible under the two regimes anyway.

This may be one reason that people are recommending tax advisers - although a determined amateur should be able to work through it all eventually.

Last edited by LittleGreyCat; Feb 4th 2016 at 12:12 pm.
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Old Feb 4th 2016, 12:21 pm
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Default Re: A UK state pension to NZ super question.

In the hope that it will help others, I will report on my journey through the mire.

My income is likely to be:

(1) Occupational Pension
(2) State Pension
(3) Half rental from UK house (we won't sell immediately - belt&braces).

I pay normal rate tax in the UK.

My wife's income is likely to be

(1) Half rental from UK house
(2) Eventually (and receding further all the time) State Pension.

So far it is looking as though the house rental will be taxed in the UK, but the wording of the HMRC document is quite fancy.

Any income for my wife under UK taxation rules is currently not taxed because the total is less than £10,600.
This suggests that any taxation in NZ would reduce our joint income.

Last edited by LittleGreyCat; Feb 4th 2016 at 12:31 pm.
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