Recent official statistics for New Zealand show that some British migrants are chosing to return to the UK. A recent Stuff.co.nz article suggests high rents and cost of living coupled with bad traffic are driving some people away. Changes of heart and circumstances always have an impact on the movement of people to and from our country and always depend on numerous factors.
What we do know is British migrants that have transferred their UK pensions to New Zealand who are now considering a move back to the UK (or indeed have moved back), do face significant consequences they should be aware of when making plans to leave our shores.
First up, tax residency… most New Zealand schemes (95% of them) will treat you as non-resident for tax as soon as you leave New Zealand and apply the standard non-resident tax rate of 28%. This means any taxable gains in the value of your funds will be taxed at 28% in New Zealand. However, if your funds were re patriated to a UK scheme you would not be paying any tax on the growth in the funds, as the UK rules allow for tax free growth on your pension pot. Leaving the pot in New Zealand means you’ll be paying tax unnecessarily on the funds you leave behind.
There are two ways to avoid this, either move your pension back to the UK by transferring it to a UK pension scheme, or transfer it to a Zero-Rate scheme in New Zealand. Either of these options would have you paying no tax on the growth in your scheme assets. Importantly you need to understand the challenges of setting up a new UK scheme to receive your transferred funds back in the UK and importantly where’s the best place to have them in the future.
The second issue is exchange rates. If your funds have been converted to New Zealand Dollars and invested in New Zealand based investments should you be moving them back into sterling funds now you are heading back to the UK?
With so much volatility in exchange rates at present that is a key consideration.
The third issue is tax. There are many components to this but the main ones are:
- Payments out of a QROPS while you are a resident in the UK will be taxed in the UK the same as if the payment was made from a UK scheme
- If you have received payments from a QROPS while in New Zealand and have returned to the UK after having been overseas less than seven years you may have UK tax issues
- Whether or not there are any lifetime allowance issues for you to consider on your UK and QROPS pensions
All tax questions must be asked and answered before you act to avoid receiving an unexpected tax bill. We can help you navigate the choppy waters of your transferred UK pension funds if your’e considering a move back to the UK… armed with the right information you’ll ensure you don’t end up in an unexpectedly worse position.