It’s a complex process
Anyone with a UK pension scheme that meets the criteria who lives overseas or is planning to leave the UK can transfer their UK pension plans into a QROPS (Qualifying Recognised Overseas Pensions Scheme).
A pension transfer is when you move your UK pension from your account in your UK scheme to an account you establish in a New Zealand superannuation scheme.
In most instances, for a pension transfer to occur your UK pension scheme will sell all your investments in the scheme and convert all your funds to cash. Then they will transmit the money to the trustees of your New Zealand scheme. The trustee of the New Zealand scheme will then take those funds and invest them according to you stated investment strategy.
On some occasions the transfer of the assets from the UK may be what is called “in specie”. This is when the trustee of the UK scheme assigns ownership of the assets to the Trustee of the New Zealand scheme. This might be where an asset like a commercial property is held in a UK pension and the person transferring their pension does not want to sell the property but merely transfer the ownership to their New Zealand pension scheme.
With load of paperwork
A pension transfer is governed by lots of complex regulations. The scheme in New Zealand needs to meet certain criteria (be a QROPS) in order to be able to receive the funds and if they don’t then there are big tax consequences. These consequences extend to the UK schemes who may be fined if they make a payment to a New Zealand scheme that is not a QROPS. This fear of a fine leads the UK schemes to be super cautious when making a transfer to a New Zealand QROPS. This is great for you as it adds a layer of protection. But the reality of it now is that many schemes have made it so hard to transfer that people often give up during the process.
We are really experienced in dealing with UK pension providers through our decimated office in Manchester and getting the right results for our clients by pushing through the endless requirements of the UK pension providers.
It’s often worth persisting
The financial benefits following a transfer of UK pension rights to a QROPS can be huge if planned correctly, including:
- Greater benefit flexibility
- Ability to leave your pension fund to your loved ones free from UK tax
- Future financial security of your pension
- Wider investment choice in your local currency
- Better tax outcomes
UK pensions have traditionally been tied up in many layers of restrictions and regulations. In part this is to protect UK tax revenues by taxing income from annuities as well as any residual value on death at 55%. And to stop pensioners spending all their money in the early years of retirement and then relying on the State! New Zealand pensions do not come with this same mindset and so are considerably more flexible and tax efficient. But there are advantages and disadvantages of New Zealand and UK pensions and that we why we recommend you seek professional advice before making any decision.
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UK pension and what it means to leave it or transfer it
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