For many years transferring a pension from the UK to New Zealand was not the norm with confusing legislation and tax compliance issues. All that changed in late 2013 when the Inland Revenue proposed a tax amensty on UK pension transfers that suddenly thrust the decision of whether to transfer under peoples noses. This led to a wall of UK pension transfers hitting New Zealand and putting UK pension transfers into the consciousness of British expats and New Zealanders who had lived and worked in the UK.
Since then UK pension transfers have become mainstream with over $1.5billion being transferred into New Zealand schemes (excluding KiwiSaver schemes) over the last four years (as shown in the graphic below).
Source: Annual reports of New Zealand superannuation schemes that are listed as QROPS
Ancedotal evidence from New Zealand QROPS is that the trend for transferring has continued at pace since March this year. This is particularly interesting given the impact of Brexit, which has thrown up a wave of concern and a weaker Pound (even as recently as last year it was at $2.40 compared to the current $1.75 level).
With most New Zealand QROPS now offering sterling denominated funds the previous issue of being forced into dollar denominated funds has disappeared. And the sterling funds have certainly been popular with most transferees since the Brexit vote, especially as there is more control over when they can be converted into dollar funds. This level of control and flexibility is in sharp contrast to the previous system of waiting for the desired exchange rate then starting a transfer which then took six months by which time the exchange rate was anyone’s guess.
NZ’s new highest tax rate increases the attractiveness of an early UK pension transfer for high income earners
The New Zealand tax regime taxes a pension transfer as personal income depending on how long you have been in