Many returning New Zealanders and British expatriates transfer their UK pensions to New Zealand for the advantages QROPS offer. The reasons that they transfer varied and can range from wanting the funds closer to home so that they can be managed more easily through to protecting themselves from any future legislative changes. After 20 years of dealing with people transferring their UK pension the most common reasons people give as advantages for moving their pension to New Zealand are:
Payments from NZ QROPS are NZ tax-free
Distributions from New Zealand superannuation schemes are tax free in New Zealand as they are considered capital distributions rather than income payments. This means when it comes time for you to receiving funds from your New Zealand QROPS you do not need to declare anything in your New Zealand tax return. If you leave New Zealand the QROPS will stay pay you free of New Zealand taxes.
Invest in local currency or GBP
Many schemes offer funds denominated in sterling, New Zealand dollars, Australian dollars and more. This means that members of these schemes can switch between sterling investments and local currency denominated investments as they choose. This can make a significant difference in retirement as exchange rate do fluctuate.
Excellent and stable regulatory environment
New Zealand has an excellent regulatory body, with wide ranging powers, in the Financial Market Authority (FMA) http://www.fma.govt.nz/ who govern New Zealand superannuation schemes. In addition the Inland Revenue (the New Zealand tax authority) http://www.ird.govt.nz closely monitor superannuation schemes tax compliance (as well as having been responsible for the set up of the KiwiSaver industry in New Zealand). Every scheme must be individually registered with and extensively reviewed by both the FMA and the Inland Revenue.
The FMA and Inland Revenue set policy that is important to New Zealand superannuation and not specifically designed to maximise QROPS outcomes. This is important as it makes QROPS a by-product of New Zealand legislation rather than the focus of it – which is friendlier for the HMRC.
English speaking by heritage
Being English speaking is crucial for most members as it means the following:
- All governing documentation is in English and not open to interpretation in another language
- All relevant authorities websites are understandable and complaints processes easy to follow
Full scheme transparency at all levels – including fees
Financial disclosure requirements in New Zealand are designed to protect the interests of the investor in financial products and services. The level of disclosure required for New Zealand schemes is second only to perhaps Australia, which is why many New Zealand QROPS investment statements run to 30 plus pages. This means that the member can satisfy himself or herself on every point prior to investing in the QROPS.
Furthermore, fee disclosure is completely transparent in New Zealand so there can never be any hidden fees leading to nasty surprises for the member in the future.
No inheritance tax
On death, a New Zealand scheme will typically pay out 100% of your remaining superannuation scheme benefits to your nominated beneficiaries. Such a payment will be free of any inheritance tax payments in New Zealand.
To understand whether you can benefit from a QROPS we recommend that you speak to a qualified financial adviser. Transferring to a QROPS can have risks and you should understand these as well.
