Pension transfer tax


There is now a 25% pension transfer tax payable in the UK

Following UK rule changes on 9 March 2017 there is now a 25% tax charge payable if you transfer to a country you are not tax resident in e.g. you live in Australia and you transfer to New Zealand. The tax charge is paid from your UK pension before your UK scheme make the transfer. Whilst the tax charge may seem punitive it is important to understand the actual long term effects of the tax charge weighed against the other significant tax benefits of a transfer to New Zealand for and Australian tax resident.

Other than the OTC there is no pension transfer tax payable in New Zealand

The New Zealand government introduced a new system of taxation on the transfer of foreign pensions to New Zealand in April 2014. This system allows people a four year window from when they become a resident in New Zealand to transfer their foreign pensions to New Zealand tax free. This legislation compares favourably to the Australian regulations that only allow a six month tax free transfer window.
However, if you are not living in New Zealand you can join a New Zealand QROPS and transfer your foreign pensions to New Zealand pension transfer tax free. So if you are living in Australia and are seeking to transfer your pension to New Zealand there will not be any tax payable in New Zealand on the transfer.
Furthermore, unlike Australia, there is no limit on the amount that can be transferred to New Zealand tax free. There are no concessional caps in New Zealand meaning that provided you are not breaching the life-time allowance limits in the UK you can transfer as much as you like tax free.
These are considerable differences when compared to the Australian tax system which would tax you up to 15% of the growth in the scheme since you arrived in Australia (if you do not transfer within the first six months of arriving in Australia), as well as any concessional limit caps that might be broken when transferring.
Disclaimer: We are not tax experts and the above represents our understanding of the current tax rules. It is not a substitute for tax advice and any reliance taken is at the risk of the reader.

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