British Expats in New Zealand and QROPS Pension Transfers
For British expats who are resident in New Zealand or Brits considering moving to NZ, they can now transfer their hard earned UK pensions into a QROPS (Qualifying Recognized Overseas Pension Scheme) in New Zealand for tax efficiency. In particular, they can avoid the 45% tax upon death whilst in drawdown which is imposed in the UK after 75 on lump sum payments received by beneficiaries and also the high levels of taxation on income in the UK.
There would be zero UK taxation on your pension and no NZ taxes either in most cases. Read here for the latest on tax on your NZ QROPS. Moving your pension to NZ is an appropriate option for British expatriates considering retiring in New Zealand. Full pension flexibility should be allowed in New Zealand, but HMRC are still in discussions. Hope fully we will know more about full drawdown possibilities by April 6th, 2016.
For those British expats who live outside of the UK and live somewhere else in the world (outside NZ) and still want to avoid UK taxes, they can transfer to a QROPS in NZ and avoid BOTH UK and NZ taxes on their pension. This may be particularly useful if you live somewhere like Thailand, which has a Double Taxation Treaty with NZ, meaning that their pension would be paid gross, free from tax in New Zealand and the UK. You can find the latest article on pension transfers to NZ here.
Benefits of QROPS for British Expats in NZ
NZ QROPS for British expats living abroad:
- avoid 55% tax upon death in drawdown that UK imposes;
- no tax upon growth of the fund;
- avoid UK income tax of up to 50%;
- whole pension can be passed to named beneficiaries upon death;
- choice of 5 fund strategies;
- pension held in GBP;
- 30% lump sum available at 55 plus 100% of growth of pension pot can be taken as a lump sum.
Taxes in New Zealand for British Expats in New Zealand
Tax for Non-Residents of New Zealand
(e.g. you are British, but retired in Thailand and hold your QROPS in New Zealand for tax efficency)
- Non-residents will avoid all NZ taxes
- Non-residents will avoid all UK taxes
- Non-residents will then pay the income tax in the country they reside in upon drawdown if applicable.
Tax for Residents of New Zealand
(e.g. British expats now living in New Zealand)
The Prescribed Investor Rates (PIR) are the taxes on your investment income.
The PIR for New Zealand tax resident individuals are 10.5%, 17.5% and 28%.
Members will be eligible for a 10.5% PIR if their taxable income in either of the two immediately prior tax years did not
• $14,000 (excluding PIE income); and
• $48,000 (including PIE income).
Members who do not qualify for the 10.5% rate are eligible for the 17.5% PIR if their taxable income in either of the two
immediately prior tax years1 did not exceed both:
• $48,000 (excluding PIE income); and
• $70,000 (including PIE income).
If a Member does not qualify for either the 10.5% PIR or the 17.5% PIR (or does not provide the Manager with a valid IRD number and notify their PIR), their PIR will be 28%. The maximum tax rate for a Member is 28%.
If a Member provides their correct PIR, they will not be required to include the attributed taxable income in their tax return. If a Member provides a PIR that is lower than their correct PIR, they may have to include the attributed taxable income in their tax return.
If a Member provides a PIR that is higher than their correct PIR, they will not be able to receive a refund of the overpayment of tax.
For investors in our NZ QROPS scheme which is PIE zero-rated, they will avoid both UK taxation and NZ taxation as a British expat in NZ
QROPS Options for British Expatriates in NZ
If you are a British expat living in New Zealand, you have a few options.
- Move to a QROPS in NZ
- Move to a SIPP
- Leave your pension where it is
If you use a UK Self Invested Personal Pension (SIPP), you will only get a 25% lump sum rather than 30% under a QROPS and you will still face the 55% tax upon death after receiving your pension income. But, you can buy commercial property and invest in a much greater universe of funds and shares. The fees are also a lot cheaper. This may be a better option for pensions under 100k GBP.
If you use a NZ QROPS, you are allowed a 30% lump sum upon transfer + 100% of the growth of the pension pot allowed as an extra lump sum. There are only 5 investment strategies, but your named beneficiaries miss the 55% tax upon death in drawdown. You will also be protected from future tax increases in the UK and may pay less income tax in NZ than you would in the UK.
Click here if you want to read more on why Brits move to New Zealand?.
Click here for more information on pension transfers to New Zealand
For more information, please send us an enquiry through the contact form on the right.British Expats in New Zealand by Richard Malpass