Transferring UK Pensions to NZ
British pensions in New Zealand are taxed in the UK, however if you are a British expat moving overseas, you may want to consider transferring your pension to NZ to reduce your tax bill.
NZ pension schemes are paid out tax-free at retirement. A NZ QROPS scheme pays out a 30% tax-free cash lump sum at 55 and has no tax on income….
….whereas NZ private pension schemes such as Kiwi Supers don’t pay a pension until you reach 65.
Pensions in New Zealand take the form of Kiwisaver schemes and local NZ pension schemes, but if you have an existing UK pension scheme and you are moving offshore, it maybe better to transfer your pension to a New Zealand Superannuation QROPS.
New Zealand pension schemes are regulated by the NZ Financial Markets Authority.
NZ Pension Age
Superannuation pension schemes in New Zealand are not taxed at retirement age. The NZ pension age is 65. (NZ Super) is the government pension paid to Kiwis over the age of 65.
However, the NZ Super QROPS is not to be confused with the Kiwisaver schemes or NZ Super government schemes. The NZ Super QROPS can be taken at 55 years of age tax-free.
If you are a Kiwi who has worked in the UK or a British expat moving overseas, it may be prudent to look into NZ QROPS schemes and take your pension at an early age as well as take a 30% tax-free lump sum at 55.
But, let’s look at how a UK pensions in NZ are taxed in the UK.
What is the Tax on a UK Pension in NZ?
UK pensions in NZ are taxed in the UK at your highest marginal tax rate which is 20% – 45% for 2015.
NZ and the UK signed a Double Taxation Agreement (DTA) in 1984.
The DTA between the UK and NZ is covered by articles 19 and 22. Basically, you are taxed at source in the UK. This is then used as a foreign tax credit, so you won’t be taxed again in New Zealand. After 65, in NZ, you wouldn’t be taxed on your pension income in NZ anyway.
Pensions and annuities
(1) Pensions (including pensions paid under the social security legislation of a Contracting State), and similar remuneration in consideration of past employment or services, paid to a resident of a Contracting State, and any annuity paid to a resident of a Contracting State, shall be taxable only in that State.
Elimination of double taxation
(2) (a)Subject to the provisions of the law of New Zealand from time to time in force relating to the allowance as a credit against New Zealand tax of tax paid in any country other than New Zealand (which shall not affect the general principle hereof), United Kingdom tax computed by reference to income from sources in the United Kingdom and paid under the law of the United Kingdom and in accordance with this Convention, whether directly or by deduction, in respect of income derived by a resident of New Zealand from sources in the United Kingdom (excluding in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid), shall be allowed as a credit against the New Zealand tax computed by reference to the same income and payable in respect of that income.
UK Pension Transfers to NZ
If you are looking at a UK pension transfer to NZ, you must differentiate transferring a UK pension to a NZ Kiwisaver pension scheme from a NZ Superannuation QROPS scheme.
We will discuss UK pensions to NZ Super QROPS.
The advantages of a NZ Superannuation QROPS Scheme for expats and returning Kiwis
- Can take a 30% tax-free cash lump
- Can take your pension at 55 rather than 65 in Kiwisaver scheme
- No tax on death
- No tax on growth
- No maximum age to take a pension – this makes it a very good estate planning tool
- NZ is considered an “onshore” QROPS jurisdiction which makes it a great neutral jurisdiction to park your QROPS in.
- Your NZ Superannuation QROPS can be paid to a bank account to anywhere in the world to a currency of your choice.
- NZ based discretionary fund manager
- A Superannuation NZ QROPS is a low cost QROPS offshore pension scheme which is an excellent tool for avoiding IHT on death.
Tax on a NZ Superannuation QROPS in 2015
There is no income tax on NZ QROPS in 2015. Your income tax bill will then depend on the country you live in and the individual particulars of the DTA between the country you take pension income in and New Zealand.
Who is a NZ QROPS suitable for?
NZ QROPS is an excellent pension planning tool for those with small pension schemes who want them managed on their behalf or for risk averse pensioners near retirement age who just want to park their pension in a conservative jurisdiction in order to pass on their pension pot to loved ones upon death.
“NZ is a secure QROPS in an OECD white listed country.”
In fact, An updated of the 1983 double taxation agreement between the United Kingdom and New Zealand was announced and came into force in August in 2018. This was to strengthen OECD double taxation standards in regards to exchange of information between tax authorities and enforce laws to recover debts.
If you are a risk averse expat pensioner, you can do worse than transfer your pension to a NZ QROPS. This will protect your pension from tax on death and tax on income at source whilst allowing a larger tax-free lump sum than in the UK.