At first glance, there are good reasons to transfer your UK pension. If your pension is in New Zealand, funds can be accessed in full from the age of 55 without any tax deductions. Plus, if you make the transfer within four years of arriving in New Zealand, your fund can be transferred tax-free. Sounds like a win-win right?
Not so fast. If you have a final salary scheme, or insurance benefits, there may be good reasons to keep your pension in the UK.
That’s why you need an expert Auckland mortgage and financial adviser, who can thoroughly review your pension scheme and overall financial situation, to make sure transferring really is in your best interests.
There are a lot of reasons it makes sense to have your money close at hand. It’s easier to keep track of your overall financial position when your funds are consolidated, you have a local adviser in the same time zone, and you don’t have to keep tabs on the financial stability of a UK pension fund.
You’ll have peace of mind knowing your hard-earned pension is locally invested, and you’re financially ready for new opportunities. We’ll even take care of all the paperwork for you.
As full-service financial advisers, we can advise you on more than just the pension transfer process. We will consider your pension as part of your complete financial picture, helping you make the overall best choices for you and your family.
Yes but you will be taxed.
If you transfer your pension to New Zealand within four years, you can not only transfer it tax-free. You can withdraw your entire lump sum at age 55 with no tax, and spend it when and how you like.
If you leave your pension in the UK, you may have built up quite a lump sum by the time you turn 55. But every time you withdraw money, you will have to pay UK income tax.
The more you withdraw, the higher your income, and the higher your income, the higher your tax bracket goes. You end up with a good pension fund, but limited flexibility, because you can’t access your money without handing over a decent chunk of your savings to HMRC.
There are a number of factors that could affect the balance of your pension, so it’s important to get comprehensive advice from a qualified adviser who is an experienced investor – not just a salesperson.
Depending on your UK scheme, you might also lose some benefits like insurance cover. If you’re withdrawing from a defined benefit scheme, you will receive a lump sum transfer, which may or may not be enough to generate the same returns in your New Zealand scheme over time.
The exchange rate will also impact on the total amount transferred. If the exchange rate timing is poor, we can keep your funds in GBP after transferring your UK pension.
Like any investment there are risks attached. We can’t guarantee your pension will perform better or worse than your UK fund, but we can give you comprehensive advice, backed by evidence and tailored to your unique circumstances and overall financial picture. We’ll help you work through the risks, so you can make a fully informed decision that’s right for you.
When you move to New Zealand, you have four years to transfer your pension without being liable for tax. You can still transfer your pension after the four year window has passed but the tax liability increases with each year.
When it comes to investing for retirement, there’s no one-size-fits-all approach. It will depend on your overall financial situation, your level of debt and the value of other investments, as well as your age, the size of your pension and your appetite for risk.
We will look at your overall financial picture and help you make fully informed choices that are right for you.
UK Pension Transfer funds must be deposited in a Qualifying Recognised Overseas Pension Scheme (QROPS) or else there are steep tax penalties.
With a QROPS fund in New Zealand, you can choose to withdraw money from the age of 55, or if you become seriously ill. Withdrawals from a New Zealand QROPS are tax free.
If you keep your pension fund in the UK, you would be taxed on income taken from it after age 55, and that makes it hard to take much income each year without a large tax bill.
The New Zealand QROPS would incur tax on dividend income received in the years before accessing it. This tax cost would all incur within the QROPS investment. The UK pension does not incur tax on dividend income during the years you are investing in it.
We can help you there. Our preferred QROPS is:
You are not locked in to your choice of QROPS and can transfer your funds to a different QROPS scheme in the future if you choose. Costs may apply though, so we’d prefer to help you make the right choice, right from the start.
If you return to the UK within ten years of your original departure from the UK, you will have to pay UK tax on any amount transferred above 25 percent. If you move to another country within five years from the date of the transfer, an Overseas Transfer Charge of 25 percent will apply.
When you die, the balance of your pension will be transferred to your estate. Unlike the UK there are no death duties on pension funds in New Zealand, so your estate will receive the full balance (less any applicable fees or charges).
In most cases yes, however you can continue to hold funds in GBP if the exchange rate timing is particularly bad.
You can but you don’t have to. When you work with me as your investment adviser, I will look at your entire financial picture and make recommendations tailored for your situation.
There is no transaction cost and we take care of the paperwork.
In some particular situations where you have been in New Zealand for well over 4 years we may recommend that you receive additional advice from our preferred tax specialists, but we will let you decide in advance if you want to incur this cost.
It can take up to 6 months, so it is good to engage on your UK pension transfer early, and work with us to help to get it right first time.
Start talking to us to learn about what you can borrow, when you can borrow it, and what actions you should take now to make your application look better to the lenders later.
Yes, it is possible. You can apply for an Overseas Investment Office exemption at a cost of approximately $2,000. We can guide you through this.
It’s hard to say but if you talk to us about your situation we can advise you in minutes on what you can afford to borrow.
No this is not considered an income to be taxed in New Zealand, but you may have to pay capital gains tax in the UK.
Yes it does with most banks but it will be scaled down in the calculation and UK expenses would be calculated also.
There is no stamp duty, but you will likely have solicitors’ costs of approx $1,200 plus GST (15%). However, the banks will pay you a cash contribution that recently has been around 0.6%-0.7% of the loan amount.
Mortgage brokers earn commission from the banks so there is no fee to clients.
Mortgage brokers are likely to get you a better deal, and will understand the banks that have the best credit policy for your situation. That’s important because every application or credit inquiry hurts your credit rating, so we need to pick out the best two banks and apply to them. Good Auckland mortgage brokers will also advise you on how to reduce your mortgage and reduce the profit for the banks which will be your gain.
No, this is a myth and the truth is the credit card will count as a negative in your mortgage application.
Start talking to us. We help you understand how much income you need in retirement, and then figure out the right plan to get that income.
Kiwisaver is the New Zealand superannuation scheme. If you are employed you can contribute 3%, 4%, 6%, 8%, or 10% and your employer will need to contribute at least 3%. The government will chip in with $521 each year so there is some free money to be had, and the long-term results are astonishingly good. The funds are accessible as a lump sum at retirement age. You can choose from 34 funds. Most people just go with their bank but it is better to go with an investment specialist. Talk with us to get your investment selection right.
You can look at long term performance, but you need to look at more. The reason is that investment performance fluctuates and so you need to understand the investment process, and then stick with the investment process. Performance chasing is the enemy of compounding returns.
Give me a call 021 222 0700 and let’s talk about your scenario.