Here comes Brexit – is it time to Exit? Taking control of your UK pension
Being at a
migration expo I spent a lot of time talking to people who are seriously
looking at relocating from the UK, with the uncertainties created by Brexit
most commonly mentioned as the reason for people to consider migration in the
near future.
Most migrants
between developed world nations do so for a combination of economic and
lifestyle reasons. Some of the people I talked to in the UK were worried about
the future prospects for the UK economy and therefore their careers, while
others were concerned about narrowing attitudes in the UK towards Europe and
people from other European nations. Most viewed any of the three countries
mentioned above as likely to have a better lifestyle than they could get in the
UK.
The most sought-after
exhibitors at the expo were those who could find prospective migrants a job and
through that get them a visa for the destination of their choice - be it New
Zealand, Australia or Canada.
The good news for
the expo attendees was the high level of demand from each of the three countries
for migrants with the right skills. With respect to New Zealand, employers were
seeking migrants who had qualifications and work experience across a variety of
engineering disciplines as well as in construction, teaching and a few other
areas.
Next most popular
exhibitors at the expo were the service suppliers that migrants would need to help
them shift their ‘stuff’ from the UK to their new destination, be it FX
transfer, moving pets, finding a house, moving household goods etc. Many were
offering special deals to expo attendees.
Which then left
groups like us, who were there to promote our UK pension transfer services, as one
of the exhibitors to talk to once everything else was under control. Which, in
part, is the good news. Not everything needs to be fully sorted out before you
left the UK.
However, that
statement has a big caveat – like with all important decisions, its best to do
so on a highly informed basis. Especially understanding the financial
implications of migration of which your UK pension might be a material part.
Given this, the
most common questions that I was asked at the expos (and my answers) were:
Can I transfer my
pension from the UK to New Zealand?
For those who work
for the UK Government and most who are in final salary pension schemes – the
answer since 2015 is NO. This affects teachers, NHS workers, armed forces,
police etc.
For private sector
workers, local Government pensions, personal pensions etc the answer is YES.
What do I transfer my UK pension into?
In NZ there’s about a dozen collective schemes which are compliant with UK rules and listed as QROPS (qualifying recognised overseas pension schemes). QROPS can receive UK pension transfers. Around half of these schemes are managed by established funds management companies including NZ Funds.
Do I pay tax when I transfer my pension to New Zealand?
For migrants and most New Zealanders returning to New Zealand, as long as the pension transfer is done in the first four years of New Zealand tax residency, there is NO NZ tax to pay on transfer. After that there is.
Can I use my transferred
UK pension funds to buy a house in NZ (like with KiwiSaver)?
Access to your
transferred UK pension funds is only allowed once people reach the age of 55
unless there is serious illness. So it’s not like KiwiSaver.
Do I pay tax in NZ when I draw down my pension?
Once you have transferred your UK pension to a New Zealand qualifying scheme, any withdrawals from that scheme do not attract NZ tax. It is important though that the UK rules of access to your funds are observed.
Do I need to
exchange my sterling to NZD when I transfer even if I don’t like the exchange
rate?
Not necessarily. Many QROPS schemes in NZ including the NZ Funds Managed Superannuation Service have sterling investment options that provide flexibility on the timing of the FX shift from GBP to NZD.
Not necessarily. Many QROPS schemes in NZ including the NZ Funds Managed Superannuation Service have sterling investment options that provide flexibility on the timing of the FX shift from GBP to NZD.
Is the transfer
process of transferring a UK pension to a NZ QROPS expensive?
It doesn’t have to
be. We aim to minimise the advice fees, have nil entry and exit fees and
provide wholesale exchange rates. However there are advisers and QROPS who
charge what we believe are high advice fees, transfer fees, entry fees, and use
retail FX currency rates for currency conversion. It pays to get transparency
on this before committing.
What we know is that every UK pension, combined with the individual’s situation, is unique. So while understanding the issues in general terms is useful, when it comes to transfer time personalised advice from an authorised financial adviser can add a lot of value to you.
David van Schaardenburg is Head of NZ Funds Private Wealth and a Principal of NZ Funds Management based in Auckland. The opinions expressed in this column are his own and not necessarily that of his employer. His disclosure statements are available on request and free of charge. NZ Funds Management Limited is the issuer of the NZ Funds Managed Superannuation Service which is a QROPS.
