If you have worked in the UK and contributed to a pension scheme, this article may affect you.
For New Zealanders who have UK Pensions, the rules around accessing these pensions and bringing them back to New Zealand are getting more and more complicated. Prior to 2012 it was possible to transfer your UK pension to New Zealand, and depending on the scheme that you were in in the UK and the scheme that you transferred to in New Zealand, it was possible for you to be able to withdraw those funds.
Since early 2012, any transfer required the funds to be locked up until age 55 (or later if your UK pension scheme stipulated a later date). At that date, 30% was able to be taken out in a lump sum, with the remainder being required to be paid in an 'income for life' based on tables issued by HMRC in the UK.
Until April 2015, transfers of UK pensions were allowed into KiwiSaver schemes that had QROPs status. As of that date, all QROPs status was removed (overnight) from KiwiSaver schemes, so no more transfers can be made. For people with UK Pensions in KiwiSaver schemes, the funds can only be accessed at the age of eligibility for NZ Superannuation (currently age 65) - or upon death or serious illness or some other small exceptions. Unfortunately, as no KiwiSaver schemes have retained QROPs status, and any funds in a KiwiSaver scheme have to be transferred to another KiwiSaver scheme, you are unable to move your funds out of the KiwiSaver scheme that they are in.
Other changes have included:
- The introduction of taxation on Foreign Superannuation funds brought back to New Zealand (depending on how long it is since you returned to live in New Zealand). There is a four year exemption period, after that, a percentage of the funds transferred is taxable at your marginal tax rate. In general - it is best that you fund any of these taxes out of your cashflow or other savings, to ensure that you don't trigger another tax in the UK.
- People in Defined Benefit schemes in the UK have a large number of additional rules placed on any transfers (from April 2015) - including the requirement to get financial advice from a UK based adviser if the value of your Defined Benefit plan is in excess of GBP 30,000.
The next change - from 1st December 2016.
This change is from the New Zealand tax authorities under the Financial Markets Conduct Act 2014 (FMCA). On 1 December 2016 new legislation will come into effect that will restrict the amount of funds that can be withdrawn from a New Zealand superannuation scheme for members age 55 years old to only 10% of the fund balance.
The new rules are designed to restrict withdrawals from New Zealand Superannuation schemes before the normal state pension age of 65.
Permitted withdrawals for transition into retirement will be allowed from age 55, upon application to the scheme manager as follows: "The maximum withdrawal will equal the value of the fund at the start of the period divided by the number of relevant periods that commence before the NZ Superannuation age of 65 (plus 1 year)"
People who have transferred their pensions in the past, or are considering a pension transfer immediately need to understand how their New Zealand scheme intends to deal with these compulsory legislative changes. After 1 December 2016 you will not be able to join a new scheme and still have the ability to withdraw 30% (or more) at age 55.
How can Moneyworks help you with your UK Pension Transfer?
With the continually changing rules, providing advice on UK Pension Transfers has become a specialist area, so at Moneyworks, we no longer provide advice to clients on their transfers. However, we have arranged to be able to refer you to an adviser that we hold in high esteem to be able to help you.
If you would like some assistance and a referral, contact us by emailing us at email@example.com.
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By Carey Church