UK Pension Transfer to New Zealand - The Definitive Guide

Our guide explains everything you need to know about UK to NZ pension transfers, including pros, cons, must-know considerations, tax obligations and approved New Zealand QROPS options

Updated 14 September 2020

Pension transfers from the UK to New Zealand are increasingly popular but there are several things to be aware of before making a decision. As a general warning, the best approach is to proceed with caution - there are many negatives aspects of pension transfers and the damage can be irreversible. Whether you’re nearing retirement or just want your money where you are living, there are specific processes and regulations you should know before transferring funds.

Know this: It’s always best to consult with a pension funds expert before transferring funds. This is because of the complexities around tax, which can adversely affect your pension balances. Most tax liabilities are minimized when you handle the transfers correctly.

In this guide, we outline the general process for pension transfers from the UK to New Zealand. We cover:

• Know This First: Is it Legal to Transfer Pension Funds to New Zealand?
• Transferring Pension Funds from the UK to NZ - Five Things to Know
• UK to New Zealand Pension Transfers - Frequently Asked Questions
• Six things to know before deciding to transfer UK pension funds to a New Zealand QROPS provider
• UK to New Zealand Pension Transfers - Concluding Comments

Know This First: Is it Legal to Transfer Pension Funds to New Zealand?

In short, yes, it is legal. But you must transfer the funds into a Qualifying Recognized Overseas Pension Scheme (QROPS). A QROPS is qualified if it’s an New Zealand pension plan approved by HM Revenues & Customs for the UK, and the choice is yours as to which scheme you want to invest in.  The QROPS are not KiwiSaver funds but are, instead, a number of pension funds operated by well-known investment managers. Examples include Booster, Craigs, Kiwi Wealth and SuperLife.

Why is this important?
Transferring your pension as a 'recognized transfer' limits your tax liabilities upon transfer (in most cases) and protects your investment. However, other non-financial benefits (such as spouse cover) are unlikely to transfer to the QROPS scheme you select. We explain this in detail below.

Transferring Pension Funds from the UK to NZ - Five Things to Know

There are specific regulations for transferring funds from the UK to NZ, which we detail below:

1. Understand What Pensions can you Transfer
You may transfer most pensions as long as you aren’t in retirement. A few examples include:

• Occupational pension scheme
• A defined contribution pension scheme
• A final salary pension scheme
• Small Self-Administered Scheme

Important: Other schemes are eligible too. The largest requirement, no matter the scheme is that you aren’t in retirement. If you’re 55 years or older and taking benefits, you may not be able to transfer the funds.

2. Move your Pensions Within Four Years to Avoid New Zealand Tax Obligations
Currently, UK to New Zealand pension transfers have a four-year transfer window. This starts the day you become a New Zealand tax resident. If you transfer your pension within this time and into a QROPS, you won’t incur New Zealand tax liabilities. 

If you wait until after the four-year window, you’re liable for taxes on anywhere from 4.76% to 100% of the funds, which can significantly reduce your pension balance.

3. Understanding the UK Tax Liabilities
It’s best to use a pension expert when transferring your funds; one wrong move and you could lose a large portion of your retirement funds. While you'll need to transfer your money into a QROPS, there are other considerations to be aware of:

1. You may owe up to 25% of the amount transferred if you leave New Zealand within five years of transferring there.
2. If you withdraw more than 25% of the balance upon turning 55-years old, and return to the UK within ten years of leaving, you may incur a UK tax liability.
3. Using a pension specialist throughout the process helps ensure you stay within the legal limits and don’t incur unnecessary tax penalties.

4. Know the Process to Transfer Your Pension from the UK to New Zealand
If you've made an informed decision to transfer your pension, there are some steps to arrange the process. You will need to:

• Write to the UK provider and let them know if your intentions to transfer your pension to New Zealand
• From there, the provider has 30 days to respond with the requirements you'll need to follow
• After that, you have 60 days to comply with the requirements, or you may incur a 25% overseas tax
• The best approach is often to work with a pension advisor in New Zealand to complete the transfer legally

5. Important: Don't Be Reluctant to Seek Expert Help

1. Transferring your pension funds to New Zealand is a great idea if you’re retiring in New Zealand, but make sure you know the regulations.
2. New Zealand has attractive tax regulations that can benefit retirees, but it’s the pension balance transfer itself that could incur tax issues if you aren’t careful. Handle it right, and you minimize or even eliminate tax liabilities until you withdraw the funds.
3. One wrong move, though, and you could deplete your retirement savings significantly. To avoid this, it's always best to consult with a pensions expert, have your New Zealand accounts set up before transferring, and follow all legalities to ensure you can enjoy your golden years in New Zealand.​

UK to New Zealand Pension Transfers - Frequently Asked Questions

​Can I transfer my UK pension to New Zealand?

Yes, as long as you meet specific conditions:

1. You are not already receiving income from an annuity purchased with your UK pension funds; and
2. Your pension is not a State Pension, unfunded public sector pension or civil service pension; and
3. The scheme you are transferring to is a QROPS - we have linked the eligible fund managers and funds here

Can I transfer my UK pension to New Zealand while living in the UK?

In most cases, no. You will usually need to be living in New Zealand. ​

How long does it take for UK pension funds to be transferred to New Zealand?

While there are no guidelines, and every scheme is different, you can expect any time between three and six months. Once the money is received into New Zealand, your investment scheme will likely issue a confirmation of receipt. 

Will I pay tax when transferring UK pension funds to New Zealand?

Yes – but only in some cases. Some transfers to and from a QROPS may incur a 25% UK tax charge called the ‘Overseas Transfer Charge’, but this only applies if:

1. You are not a New Zealand tax resident when you request to transfer your UK pension funds from a UK pension scheme, or
   
2. If you are no longer a New Zealand tax resident within the five year period from when you first requested the original transfer (and the money was not initially charged the fee), or
3. In other situations – a pension transfer expert is the best person to talk to make sure the Overseas Transfer Charge doesn't apply ti you – examples of advisors include include Craigs, AMP and Booster, among others.

How can I withdraw money from my QROPS account?

Once you reach the UK’s minimum pension age (currently 55), you can receive the money your request in your QROPS account (as a one-off payment, as a regular income or as a combination of both). There are other circumstances where you can have an early entitlement to your money, for example, retiring early due to ill-health. ​

Can I transfer my UK pension into a KiwiSaver scheme?

No. KiwiSaver schemes do not meet QROPS requirements - you can see the list of eligible schemes here. 

Will I pay fees to transfer my UK pension to New Zealand?

Yes and No. It depends on how you initiate the transaction and who the QROPS manager is. While you will almost certainly pay ongoing management fees for the fund or investment plan, you invest into, but there may also be a one-off advisor fee and/or ongoing service fee for handling the transfer. To know what you’ll pay, ask upfront about the potential fees that will be charged.

What happens if I transfer to an overseas scheme that is not a QROPS?

Generally, if you transfer to an overseas pension that it not a QROPS, the transfer will be seen as an 'unauthorised payment' which can incur a tax charge of up to 55%, in addition to other potential penalties. Never move your pension fund without full consideration - many scams exist in the UK and people have lost their pension balances and found themselves with tax bills to pay for the unauthorised payment they initially made.

How do I choose a QROPS, and which one is best?

There are many options when it comes to recognised overseas pension schemes. Generally, the best approach to find the most suitable is to consider the following:

Step 1: Understand the Investment options - is the fund growth-focused (the riskiest, as they invest in shares), balanced funds (mixing share investments with less risky term deposits and cash etc.) or conservative (even lower risk, with usually around 80% of the money invested in bank deposits and fixed-interest bonds), or something else?

Step 2: Understand the fees - all QROPS funds charge management fees, usually in a dollar amount and/or a percentage of your investment’s value. Either way, the lower the fees, the better off you’ll be in retirement (if returns are equal among providers).

Step 3: Evaluate the Performance - you can only compare funds in the same categories; for example, it’s pointless to compare the performance of a growth fund with a conservative fund – they invest in entirely different things. To get an idea of the best-performing funds, shortlist some funds and ask for the most recent financial results (or look online).

Six things to know before deciding to transfer UK pension funds to a New Zealand QROPS provider

• Transferring your UK pension isn’t as straightforward as it seems, and there’s a lot to consider. You may even decide not to transfer your pension even after moving to New Zealand, which you're fully entitled to do.
  
• We’ve itemised six must-know facts below to help you navigate the process while being better informed.
  
• Whatever you decide, there will be advantages and disadvantages, and in many cases, it’s a significant financial decision. For this reason, it’s important to consider taking expert financial and tax advice.

Transferring the pension could mean you relinquish other benefits

Some UK pension schemes provide additional features such as a spouse or dependent pensions, inflation-linked increases or other benefits like insurance cover. If you transfer the money to New Zealand, your UK pension scheme phases it. Moreover, it’s unlikely these benefits will be offered by your New Zealand provider.

Exchange rates significantly affect the amount of money you’ll receive

With the effects of BREXIT and the relatively strong NZD:GBP exchange rate, you may transfer your pension balance at when it’s less favourable to do so. For example, a £50,000 pension balance is worth $100,000 with a 0.50 NZD:GBP rate, but at 0.40 the balance jumps to $125,000. ​

Pension terms and benefits vary between New Zealand and the UK

The UK is very pension benefit-focused, which can be financially rewarding to many people in their retirement. Your expected annual pension in the UK may be significantly more than what you’ll receive in New Zealand. In such cases, you may be in a worse financial situation by transferring to New Zealand.

Once you transfer, you’ll (usually) give up your pension benefits

Pension schemes ‘grandfather’ the benefits to their existing investors, but once you transfer out and leave the scheme, you will be unable to re-join later on (should you move back to the UK) and receive the same benefits. This can make you financially worse off for life. ​

There are tax implications if you decide to transfer

Transferring pension(s) from the UK to New Zealand can have tax complications. To ensure you’re not penalised adversely, it’s best to consider taking specialist financial and tax advice. ​

You do NOT need to transfer your pension if you leave the UK

​If you move to New Zealand, you do not have to transfer your UK pension. You are able to leave the pension in the UK and draw down on its benefits when you're eligible to. You can manage currency risk (just in case the New Zealand Dollar gains in value against the British Pound). You can also draw on all the benefits you originally signed up for. Many New Zealanders returning from the UK choose to leave their pension where it is rather than transfer it.

UK to New Zealand Pension Transfers - Concluding Comments

• Transferring a UK pension to New Zealand is not straightforward and the decision-making process should not be rushed. 
• Many pension schemes that remain in the UK will, arguably, do no better or no worse than the results you'll from an approved New Zealand provider. If you have specified benefits with your existing UK pension fund, these will unlikely carry over to New Zealand.
• If your situation is complicated, and/or if you feel like you need an expert opinion, New Zealand companies such as Booster, Craigs, Kiwi Wealth and SuperLife all offer specified UK pension transfer advice. We have no relationship with these companies and link them as examples only.

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