[Singel]

In today's Herald on Sunday...............
David Milner, a certified financial planner with Britannia Financial Services, answers questions on bringing UK pensions to New Zealand.

There is a photo with a caption.... NEW START: When grandparents emigrate from the UK to join families, pension portability can be an issue.

Q My wife and I arrived in New Zealand from Britain in December. I am a computer programmer in my 30s and my wife works in human resources. We have frozen our pension savings in the UK and will start new savings schemes here. Will we have to pay tax on our UK pension savings even though no money is going into them?
And if we start pension schemes here, will we have to pay tax on them in the UK?

A The United Kingdom operates an EET pension savings system which means the savings are made (up to certain levels) with tax concessions, gains made within the scheme are tax-free (although some equity elements within UK pension schemes do not receive a full free tax entitlement).
The pension or annuity paid at retirement age is taxable.
New Zealand operates a TTE system which is exactly the opposite. Contributions made to NZ schemes are made from tax-paid income, gains made within the schemes are taxed. The resultant end benefit is therefore tax paid.
If you have an interest in a UK pension scheme into which you paid more than $50,000 before you became a resident of New Zealand you will be caught under present FIF rules, and gains made by your UK fund should be declared after the expiry of the allowable exemption period of three years plus the remainder of the year in which you arrived in New Zealand.
You will not pay UK tax on your NZ pension schemes.

[Singel]

Q I am a Kiwi who worked in the UK for 10 years in the 1990s. I had a couple of stints during which I was paying into work superannuation schemes. Is it possible to track these savings down and bring them back to New Zealand? I wouldn't think they would be worth terribly much, probably 20,000 pounds. How much would it cost me to bring the money back here? And are there other costs attached?

A Yes, it is possible to track your pension. Visit website www.thepensionservice.gov.uk and click on the section headed pension tracing service, or you can correspond with the Pensions Advisory Service (OPAS) at : 11 Belgrave Rd, London, SW1V 1RB, United Kingdom. You should also visit www.ukpensionstonz.com.
The benefits in your UK schemes will be expressed as a future pension but you can request the transfer to New Zealand of the cash equivalent value of those benefits. Transferring pension benefits is complex so you should select a transfer company well versed in the processes.
There are new UK regulations coming into force on April 6, 2006, which will make transferring preserved benefits a little more difficult. At the moment pension transfers exit the UK without penalty, but from April next year there will be a penalty of up to 40 per cent payable on all transfers made to schemes which are not qualifying, recognised overseas pension schemes.
There is a payment made for transfer services. These fees are negotiable and depend very much on the value of the transfer involved.

[Avalon]

Nice - we are actually using brittania at the moment to investigate bringing some of our pensions over. I have 2 titchy ones which will currently get me a pension of about 46p a month (I wont spend it all at once!), and I can cash them in completely if I bring them over (Has to be under $20k nz) Alan has one he is bringing over and cashing in 49% (its over $20k), and one hes leaving because it has benefits attached.

Not sure ive understood the process yet, but Britannia get the figures, and then we will look at the situation. We dont pay anything UNLESS we transfer - so i figured it didnt hurt to get the info.

[Michelle and Richard]

I have heard that you shouldn't be paying to transfer and I have my doubts about some of the companies charge a percentage of around 3% All banks do it for free, I guess they make their money when you exchange at their rates. Speaking to ASB at the moment so will post how I go on.

Michelle

[Avalon]

Michelle,

Ill talk to the bank next week!!!!!

Thank you!!!!!

[Moorf]

So what should we do? We both have private pensions in the UK, we have frozen one and we are paying minimal amount in the other. I am now offered 5% superannuation which I can pay into the councils scheme or into one of my own. What are my options with regards to continuing to contribute to my UK pension / should I transfer (can I transfer? Is that dependent on each policy etc?). I hate this sort of stuff...

[Dinnaefash]

I'm investigating this at the moment. Basically comes down to whether you want to get your mitts on your money, or want to reinvest it. ASB only let you get 20% and reinvest the rest til you are 50, no charge; Britannia let you get 49%, balance when you are 60, 5% charge.

Anyone know if there are any other companies to look at except Britannia??

[Avalon]

Just a not for people like me who have tuppence in thier pensions:

If the Transfer amount is less that $20k NZ, you can actually take 100% of the pension pot out as cash! Over the 20k, and the maximun you can take in cash is 49%.

One downside at the moment - you have to have a job or be self employed in order to transfer your pension - EVEN IF you are planning to take 100% out in cash. This is because for the UK pension company to release your pension you have to be able to put it into an Employee pension scheme.

You cannot (from what im being told) have a private pension scheme here to put your pot into if you are not working in some form. It seems this is in order to try and stop us taking the pot out of teh UK.

So now I have to form a company! I was going to do it anyway at some point (im an aromatherapist) but now I have to do it sooner rather than later.

[stephen p]

Why not leave the pension in the UK ,then when it matures the income will be converted every month into NZ dollars, that way you benefit from the conversion over a longer period of time and not do it in one hit. Just a thought. Mine is staying in the UK.

Steve.

[GeorgeM]

Problem with leaving the funds in a UK pension fund when you have the option to get them out is that you are bound by the rules of personal pensions - basically you can have a third as tax free cash and the rest has to go to buy an annuity.

Annuity levels have been dropping like a stone over a number of years due to the combined effects of gilt rates going down (which means that the two thirds which is invested produces less) and life expectancy going up (which means that the company providing the annuity expects to have to pay you for longer and as a result gives you substantially less each month).

It is possible that people in their sixties will have had their potential pension REDUCED for each additional year they worked and contributed as opposed to retiring at 60, notwithstanding the fact that they continued to contribute to their fund. The additional amount they were putting in wasn't enough to make up for the reduction in what they were getting back in pension payments as a result of the above factors.

The tight conditions surrounding how you cash in your pensions in the UK is a quid pro quo for the (not inconsiderable) sweetners the government gives you to put money in in the first place - to put in 10,000 pounds only costs you 6,000 if you're a 40% tax payer.

Taking advantage of the option to transfer your pension on migration allows you to benefit from the tax credit whilst freeing yourself from the worst effects of the pension regulations - in NZ you might have to lock in your fund until you're 60 but after that it's yours to do with as you wish. If you prefer to fund a couple of rental properties rather than buying an annuity then you're free to do so. And if you die a year after drawing down your pension you don't lose a hugh percentage of your fund to the insurance company.

You also benefit from differences in taxation by transferring - in the UK your contributions and fund growth are tax free and you then pay tax when you draw down the pension - the annuity is treated as taxable income. In NZ you pay contributions out of taxed income, and pay tax on the growth but are given the funds totally tax free at drawdown. When doing a transfer you can benefit from many years of tax free investment in the UK by transferring it into a NZ without paying any tax. You're then taxed on future growth, but at drawdown the whole of the pot is available tax free - quite a benefit IMO.

[Carol]

I wish I understood all of this....:confused:

[Moorf]

I got to line 2, word 8 and then handed the laptop to Woz to translate! :confused:

I don't do money stuff.... :no but thanks for the info GeorgeM et al, very interesting reading and something we only found out about from one of Jocalla's friends last weekend. :)

[Avalon]

Why not leave the pension in the UK ,then when it matures the income will be converted every month into NZ dollars, that way you benefit from the conversion over a longer period of time and not do it in one hit. Just a thought. Mine is staying in the UK.

Steve.

Becasue tuppence a month income from my poxy pension is still going to be 6c a month income here! ;)

Whereas £4000 in cash now, can be paid off my mortgage saving me lots and lots of money over the next 20 years :clap

Also, Mr Brown has already stolen £5bn (?) from everyones pension pots. I dont want to give him the opportunity to nick any more of my money. When I started my pension - it was a good idea, but now, well - whow many people in the UK are going to be on the breadline in retirement because of the mess the UK pensions are in.

Persoanlly - im working on other avenues to create a retirement income, which dont have the risks and disadvantages of a UK pension, and they wont be at the mercy of another tax grab by the UK government. Not that its easy trying to stay one step ahead of the tax system!

For me its just not worth keeping the pension going. Im not paying in to it, so it wont grow anyway - and now id rather invest directly while using the money that would go into a pension fund to get my mortgage off my back, and create a passive income through other means.

I guess it depends on your personal commitmenst, likes and dislikes, size of pension pots, and a host of other considerations. Those are just mine :cheers

[Tia Maria]

Avalon - Did you find out how much does it cost to transfer 'titchy' pensions? We have one that will be about £1500, and I wandered if it will get eaten up by flat fee transfer costs, or whether they tend to charge a percentage?

Michelle - Is it free to transfer via the bank or is there a catch?

Just realised we are going in about 9 weeks and I'd better start sorting things out!

[Michelle and Richard]

Yes its free and we repeatedly asked the questions. We are only doing a couple of small ones leaving our main ones until we know we are definitely staying here.

Michelle

[adamsat]

My UK pension was a final salary scheme, linked to inflation. It's currently worth half my UK salary (and will increase in-line with inflation) but It doesn't start paying out until I hit 60. I'm not sure what my options would be - leave it in the UK seems the easy option but I'm not sure it's the best?

[jubjub]

Thanks Michelle, I have just called ASB and they are going to have a look at my two teeny weeny pensions...

[Avalon]

Tia Maria,

Sorry Ive only just seen this! My brother is taking up all the email time trying to do our family tree and I just cant get on here!

Most pension transfer companies charge by % of total brought over. Often Its 5%, so you do need to look at it. We went with Brittania to get the info, and they do charge 5%, or $500 whichever is greater. So for these small pots - you are looking at 500.

In our case, they decided to charge me 5% of the total pot (which was less than $500) because OH was looking to transfer, so they were going to get a decent fee for that. Of course - Ic ant do it yet as im unemployed.

In your case - id say the banks might be better if they are free. Once ive got my employment options sorted - im certainly going to chat to ASB.

For me - Id happily have paid $500 to get the money - because it still gives me a few thousand $$$$ which is more use now, than in 20 years time.

I hope that helps.

[Avalon]

Ive just spoken to a really nice pension advisor at the ASB, and theres a little problem which I thought I should share.

Although ASB will do the transfer for free - they lock ALL the money away till you are 50! That means you cant access ANY of the money (49% for pots over $20k or 100% for pots under $20k) now.

So this works if you want to carry on your pension in New Zealand - but not if, like me, you want to get your sticky mitts on the cash.

Sorry to be the bearer of bad news - looks like Britannia is the way to go for me.

[Avalon]

Just updated as this came up on another thread.

We have had 2 cheques sent over from the UK out of 3 pensions we are transferring.

We went with britannia - so the cheques are sent directly to them. They then pay them into thier trust account and sit on the money for about a month (Until they "clear" :mad: ).

During this time we should be sent paperwork to sign to release the funds we want to, and to assign any money we are keeing in a pension into a fund.

Britannia used to allow selection of funds and actively manage the investments (I beleive the pensions are via ING) but now they are "so terribly busy" they cant be bothered - so you have very few options on how your money is invested.

Anyway - about mid april - the moeny should come rolling into my bank account :raebanana

[Michelle and Richard]

Following on from my previous posts we have now successfully transferred 3 pensions over here. We used ASB who were great no fees, good exchange rate and we can access 20% of the cash now and the rest at 50.

They did just about everthing possible to get it through so we didn't get hit with the 40% tax and I believe they are ammending their scheme so it complies with the new rules that come into force 6th April.

Michelle

[Avalon]

Wish I cvould say the same for Brittania :mad: :mad:

They had the Cheques on the 8th March, and so far cant even tell me the $$$ value, despite a number of phone calls.

I cant fill in the paperwork for release of the money until I have the numbers, and we are away for a month from next Wednesday.

So - they have about £25K of OUR money sitting in THIER account and have done for nearly a month. And I have to sit here twiddling my thumbbs because they cant be arsed to check the numbers. I mean - are they really saying taht after 1 month they dont know what the bank transfered the money at?????

Also, in hindsiggt - Brittania make a big deal out of the fact that this process can take months because of teh delays from the UK pension companies. In our case - a load of hooey! The Uk companies were fantastic: GE Pensions, Friends Provident and CIS Pensions. From the time Britannia fianlly bothered to get the paperwork to them it took them a whole week to sort everything out and send letters to us telling us the cheques ahd been sent. Britannia is the company that is holding things up - at almost every step.

Im VERY P.O'd. And at this point do NOT recommend Brittania. :mad:

[Michelle and Richard]

Definitely not the case with us, we have had letters from the UK firms confirming its been settled and almost at the same time letters from ASB confirming its gone through and the conversion amount. The do say its 21 days from issue of the cheque in the UK to clearance here in NZ but ours have gone through and we had a letter clearly showing exchange rates and values

ASB pensions do not conform with the new rules however only minor changes are required and so will be fine for future transfers, or thats what we have been told !

Michelle

[Avalon]

Well, any hopes that Brittania might turn this mess round into a half positive experience have been dashed. They have had the cheques for a month, still cant tell us how much it transfered at (though they can tell us it has cleared today!) , wont even acknowledge emails or reply to phone calls, cant even get the right client, and absolutely do not give a stuff about thier clients (unless you arent one yet - they can spend all day out of the office trying to get new clients to screw over!)

:mad: :mad: :mad:

Utterly incompetent. whats worse - they have our money, and are going to cream off 5%. God knows when we are going to get the rest of it - but at the moment no one there can even make up thier minds what forms we are supposed to fill in at this point.

Now im being told that they cant give us the $ value till we gave signed the release forms - only its the release forms we are trying to fill in but cant because we need the $ value :mad: But they have managed to give us 1 of the $ values

Is this the NZ Van lines of Pension transfers????

[Avalon]

Ps. Sorry for ranting - really needed to get that out.

We now have the figures at last so we may even see the money in our bank accounts before we get back from the Uk in a month

[Michelle and Richard]

no apology needed I would do the same, if its any consolation (and I am not sure it will be)hopefully others will read your story and not go with them

Michelle