Pension transfer tax

pension transfer tax

Done correctly there is no pension transfer tax in either the UK or New Zealand when you transfer a UK pension to a New Zealand superannuation scheme.

There is no pension transfer tax payable in the UK

Provided that the receiving scheme is a Qualifying Recognised Overseas Pension Scheme (QROPS) the UK scheme will make the transfer to the New Zealand scheme without any pension transfer tax being levied in the United Kingdom. However, if the transfer is not made to a QROPS then there will be a 55% pension transfer tax charge levied by the HMRC in the UK. Therefore it pays to get it correct.
It is up to the UK pension provider that is transferring your pension to a New Zealand QROPS to satisfy themselves that the receiving scheme is a QROPS. If it is not the UK scheme is liable for a potential fine of 40% of the transfer value. This incentive means that UK schemes are being very diligent in their transfer processes at present. The consequence of this is slightly longer pension transfer times.

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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