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Transferring a Pension from the UK to New Zealand

Updated: May 13

New Zealand has long been a destination preferred by many UK citizens. New Zealand’s stunning landscapes and lower population density are often cited as reasons for making the long plane ride to a new, less cluttered life. However, there are many financial considerations which should be considered before booking in your movers. We consider one aspect of those, deciding what to do with a UK pension. Transferring a UK pension to New Zealand can be complex. As well as possible tax consequences in both countries, there may be other pension benefits that need to be considered. These decisions should be made with the help of an independent financial adviser

Transferring a Pension from the UK to New Zealand

For many NZ residents who have UK pensions, there is an opportunity to combine historical tax-free growth in your UK pension with future tax-free distributions once it has been transferred to NZ.   Some of things to consider when deciding whether to transfer a UK pension to NZ:

NZ Tax Considerations

  • NZ tax on UK periodic pension income:  If you choose to receive a periodic pension from the UK this will be taxed in full by NZ IRD and needs to be declared as income.    This may require you to put in a tax return each year.

  • NZ tax on pension transfers or lump sum withdrawals:  If you transfer or withdraw a lump sum from a foreign superannuation scheme you may need to pay NZ tax on the full amount.    There is a four-year tax exemption period which generally applies, and if you receive a lump sum during that time, you won’t be required to pay NZ tax on the amount you receive.   After that four-year exemption, the amount of tax you pay will increase each year.

  • NZ transitional residency:   For new migrants or New Zealanders moving home after a significant period living overseas ‘Transitional Resident’ can be beneficial.  If you qualify then there is 48-month period where foreign passive income is exempt from tax.  This includes withdrawals from foreign superannuation schemes by taking lump sum benefits or transferring to a NZ superannuation scheme.  The exemption also includes income from financial arrangements, rental property income, FIF income.

UK Tax Considerations

  • UK pension transfer to a NZ ROPS: In order to transfer a UK pension tax free, the receiving scheme must be a Recognised Overseas Pension Scheme (ROPS).  The ROPS schemes are setup in a way to meet the criteria set out by the UK government.  One interesting point to consider is that KiwiSaver schemes are not able to be ROPS.  This is due to KiwiSaver schemes allowing for withdrawals to purchase a house.  Therefore, transferring a UK pension to a KiwiSaver is not a tax efficient option. 

  • UK Overseas Transfer Charge and Lifetime Allowance Charge: The UK has complex rules around taxing pension transfers. Heavy taxing can occur, e,g. the OTC at 25% and the LTA at up to 55%. But don’t be too concerned as there are exemptions for both of these rules which are applicable to many people transferring pensions.

Other Considerations

  • Death benefits: The death benefits may be better in NZ than a UK pension plan.  Some UK Annuities may have restrictions on any death benefits such as payments guaranteed for only a limited period.  A key advantage in NZ, is that there is no inheritance tax on superannuation schemes, and any transferred amount is available to beneficiaries.

  • Access to funds:  A NZ ROPS retirement age is 55 currently, although increasing to 57 from 6 April 2028.  This is the same as the UK for defined contribution schemes, however most defined benefit schemes will not provide you with a lump sum payment.

  • Risk of regulatory change:  Once funds have been transferred to New Zealand they are unlikely to be affected by additional UK tax rules.  However, if you opt to leave your pensions in the UK, there is a risk that if there are changes to how transfers are taxed, this could negatively impact on your situation.

This is a high-level overview of UK Pension Transfers but every client’s situation is unique.  There are many different UK pension plans and scenarios which means that each transfer situation needs to be considered on a case by case basis.   Working with a registered financial adviser that offers  a pension transfer service  will ensure you have the best advice and make an informed decision.

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