[NoelMC]

I have a standard life private pension and recently asked what options I have when we move to NZ, below is an extract from their reply..............

Thank you for your enquiry. I apologise for the delay in our reply.

You have several options available to you:

You can leave your pension benefits as they are at the moment until
your normal retirement date
You can take your pension benefits at the minimum age of 50 (this
rises to 55 in 2010)
You can transfer your benefits to a provider in New Zealand, as long
as they will accept this transfer

In regards to your pension contributions, you are allowed to contribute
towards your plan, for five full tax years from the date you left the
UK.
If you can confirm the date you left the UK, we can advise how long you
can
continue to contribute towards your pension plan.

Hope the info is of use

cheers

NoelMC

[andrewandjane]

theres several companies out there who specialise in this sort of thing tranfering teh money and pension rights so you dont loose out on the transfer.

i was told i could sort it all once i get there

[MarkS]

You can continue to contribute to a UK pension after you leave, but it's not necessarily a good idea. You can only contribute £2808 per year if you're not earning in the UK (which gets grossed up to £3600), and remember that you have to pay tax on that money on the way out (but see below). Potentially more seriously, contributing money to a UK pension may attract NZ tax under the FIF rules (not exactly sure what the ramifications are though). Personally, I'm certainly not going to put any more money in my UK pensions.

You can only transfer your UK pension to what is known as a QROPS (Qualified Recognised Overseas Pension Scheme). A complete list of QROPS can be found at http://www.hmrc.gov.uk/PENSIONSCHEMES/qrops-list.htm - a complete list of the NZ companies that can accept your pension is there.

Transferring your pension over is a big step, and not one you need to rush into. There's a good chance (*) that your UK pension will be exempt from the new taxes on foreign investments, and it should definitely be exempt for the first four years that you're here anyway (as long as you arrived after April 2006) so it's not going to cost you anything to take a bit of time over the decision. Also be very careful about who you use to transfer the pension, if you decide to do so - a lot of the people charge a percentage fee of the fund, which is simply outrageous. It should take just the same amount of work to transfer a fund of £10,000 as a fund of £100,000, so why should the intermediary charge 10 times as much? Find one who will bill you an hourly rate for work actually done, it's likely to be a lot cheaper unless you have a fairly small fund to move over.

QROPS schemes are forced by the UK government to obey a number of conditions to be allowed to receive UK pensions. One of these is to report all payments made from the scheme to you, so that they can be properly taxed. This is to maintain the UK principle that you pay money into a pension tax free, and then get taxed on the way out. (Note that it generally works the other way round in NZ super schemes - you pay taxed money in, then no tax on the way out.) However, the QROPS is not obliged to inform the UK Revenue if you are not tax-resident in the UK and haven't been tax-resident for the last five years. This is potentially a way to extract all the money from your pension tax-free! What I'm not clear about is what would happen if the QROPS allowed you to withdraw all the money from your transferred scheme (an action which in the UK would be subject to punitive taxation of anything up to 80% IIRC), was not obliged to inform the UK, but did so anyway. That could potentially be an expensive move.

All in all, it's a bit of a minefield. The main points are not to rush into anything, be wary of making any further contributions to your UK pension, make sure you're not getting over-charged if you do move your pension over, and be very sure what your new provider's policy is about informing the UK Revenue of withdrawals.

Also bear in mind that all this pension legislation is very new in the UK, and there is a serious lack of clarity in how it all works. Anybody (including the banks and other pension transfer companies in NZ) who categorically states that they know exactly how it all works should be treated with great scepticism - nobody does! In a few years time, the rules will have bedded down, doubtlessly been tweaked a fair amount, and all will be a bit clearer.

Hope that's all useful - I've got to stop making such long posts on the subject of UK pensions!

cheers
Mark


(*) in my opinion - I've read up a lot on this but I'm not a lawyer! You can download the legislation from www.ird.govt.nz and read it yourself, there are several exemptions for overseas work-related pensions and similar schemes, but I've not been able to find precise definitions for some of the key phrases

[Tia Maria]

MarkS wrote:

Personally, I'm certainly not going to put any more money in my UK pensions.

I was just discussing this with my OH and came to the same conclusion. But we weren't sure of a good alternative. We obviously need to save for retirement, but don't want an investement vehicle as restrictive as a pension.

What are the possible alternatives to pensions and property?

Cheers

Tia

[Avalon]

What are the possible alternatives to pensions and property?

Cheers

Tia
If you dont want a "Pension" - you could look at Managed funds that arent pensions (If I understand correctly the main difference is a lack of tax benefits with managed funds). Or buying shares directly through a broker.

Whatever you want to do - get educated! Especailly if you want to invest outside the box. You will need to understand your options and know what it all means.

Why not read Rich Dad Poor Dad for a starting point. Though its heavily into Property.

Actually - thats a good question - have you discounted Property as an Investment? If you have - do you have a reason for that?

Also - you may need to think about exactly what you want out of it - and choose your investment based on that. Wanting enough to get by in retirement will need a different sat of choices to wanting to be a squillionaire and retired by the time you are 40(ish) :D

Not sure that really answers the question - but im sure Mark will have a better answer :p

[MarkS]

Avalon's absolutely right that educating yourself is the most important step. The financial services industry loves dreaming up hugely complicated schemes that mainly serve to transfer money from your pocket to theirs in big fees. By learning how all this stuff works you can save yourself a huge amount of money.

One of the best introductions I've seen on the web (it was one of the first things I came across when I started learning about all this stuff) is the 10 steps to investing on the Motley Fool UK website. The original version is at http://www.fool.co.uk/10steps/step1.htm, a few of the links are broken now but the important stuff is still there. A re-written version is at http://www.fool.co.uk/10steps/financialfreedom/welcome.htm. Reading both of those will get you a long way. (It's all UK-centric of course, but the basic principles hold over here, even if the talk about ISAs and such doesn't)

You can of course invest in the stockmarket (either directly or via a fund of some kind) outside of a pension arrangement. If you're thinking about that, take a serious look at www.smartshares.co.nz. They are run by the New Zealand stock exchange NZX, and are the cheapest (i.e. lowest fees) way that I've seen so far to invest in the NZ and Australian stock market. They also have a regular savings scheme, which is of course a great way to build up funds over a period of years without noticing it too much.

But yes, read as much as you can - the more you learn, the less likely you are to fall for one of the many rip offs that finance companies will try to sell you.

[wiki]

Great advice Mark and Avalon :)

I've got one small question for Mark - when you talk about people taking a cut to transfer money, do you mean I HAVE to use an agent?

I've got a company pension here that I will want to move eventually and I was hoping to tell my company pension manager here to give me the value as at the end of my employment and then getting them to send that money to the account of my new QROPS NZ pension fund provider. Do I need a middle man?

From my reading, Kiwisaver isn't a QROPS. That's a shame as I'd love to fiddle a way of paying some of my mortgage out of my UK pension :)

It was so much easier when I came to the UK - my three-year-old NZ company pension scheme paid me cash for all my contributions plus their contributory figure. I travelled most of Europe on that little nest egg!

[MarkS]

when you talk about people taking a cut to transfer money, do you mean I HAVE to use an agent?

Afraid I don't know - I suspect not though. There are an awful lot of parasites out there who will arrange the transfer for you (a Google search throws up plenty). It would be well worth asking a couple of the banks for example, see what they say. You may find that some companies insist you use an IFA to arrange the deal, there's bound to be some out there that don't though. I'm imagine there's a considerable bureaucracy to deal with in moving the money over to NZ, so I don't consider it unreasonable for them to charge for doing that, as long as the fee is proportionate to the amount of work they have to do, not proportionate to the amount of money I have!

No, KiwiSaver isn't a QROPS, and if it was, they'd be required to levy punitive tax on any money taken out of the fund before retirement age. This apparent exemption if you've been non-resident for five years is definitely promising though (see http://www.hmrc.gov.uk/PENSIONSCHEMES/faqs.htm#32)

[Tia Maria]

Avalon wrote:

Actually - thats a good question - have you discounted Property as an Investment? If you have - do you have a reason for that?

We won't consider property as we simply don't know how long we'll be in NZ, we're one of those who are here for the adventure aspect, rather than definitely emigrating for good.

Avalon wrote:

If you dont want a "Pension" - you could look at Managed funds that arent pensions (If I understand correctly the main difference is a lack of tax benefits with managed funds).

I got the impression, possibly wrongly, that NZ pensions just weren't that good. I think it was a seminar I attended at a NZ expo where they were essentially saying when you had the chance to transfer and cash in some of your UK pension the last place you'd put it was in a NZ pension, as the benefits offered didn't make up for their lack of flexibility and management fees. However, this was just one seminar and I haven't had a chance to look into it any further.

Mark S wrote:

One of the best introductions I've seen on the web (it was one of the first things I came across when I started learning about all this stuff) is 10 steps to investing on the Motley Fool UK website.

Yes that is a great website, it was one of the first ones that I came across also.

I don't think I would invest in the NZ stockmarket, as it just seems too small to me. Don't know much about the Australian stockmarket, I'll check that link out.

I'd previously held a Virgin Tracker fund in the FTSE all-share, which was reasonably low risk and good value because I held it in an ISA. However, without the ISA wrapper I'm not sure if there are better investments out there, or whether it still represents good value (assuming I can invest in this as a non-UK resident).

Are there any NZ incentives, like ISAs, for holding shares?

Cheers

Tia

[MarkS]

My (incomplete) understanding of what's available in NZ is that superannuation schemes (i.e. personal pensions) are not any different at all from investment schemes (this is leaving completely aside anything like KiwiSaver or employer arranged schemes). In the UK, a pension really consists of two things - the "wrapper" and the underlying investment. People normally conflate the two things, but it's helpful to keep them separate. So, the underlying investment can be anything, typically funds managed by insurance companies with high charges, but in recent years much lower-cost funds have been introduced, and direct shareholding managed by yourself is also possible. The "wrapper" is what allows the tax-free payments in, but then places huge restrictions on what you can do with that money, when you can get at it, and ensures that the money is taxed on the way out. So, to my mind, "lack of flexibility" is THE big issue with UK pensions, and "high charges" is a common issue. (UK ISAs work much the same way - a wrapper and an underlying investment).

NZ doesn't really have these wrappers, just the underlying investments (apart from QROPS, which have to have restrictions so the UK government will allow UK pensions to be transferred into them!) You can start putting money into a "superannuation" scheme, but you can withdraw that money anytime you like unless you've agreed to a voluntary "lock-in" (in fact, the only difference between "investment schemes" and "super schemes" at a lot of the provider is that they insist on a lock-in of maybe 70% of the fund). The lock-in is going to be useful if you're worried that you might be tempted to cash in the fund to buy a sports car or a boat, but otherwise is a bit pointless. So I think "lack of flexibility" is unfair about the NZ market as a whole (although probably accurate about schemes that you can transfer your UK pension into, although then it's the UK's fault it's not flexible, not NZ's!) "High charges" is quite accurate though, lots of schemes have 5% initial fees when you invest money (just walk away from them if you can), and annual fees that are far higher than you'd get in UK or US.

Pensions are very overrated in the UK IMO, the much hyped tax benefit is not nearly as big as it's made out to be, and disproportionately benefits the middle class (well, anyone who earns > £35k now and will earn < £35k in retirement). ISAs on the other hand are not nearly highly rated enough, the only significant problem with them is the £7k annual limit (and even that is enough for most people).

So, it is a great shame that NZ doesn't offer anything like the ISA system, but there are options out there for good low cost investing. One is Smartshares like I mentioned above (a set of different trackers, NZ and Aus, at pretty low cost). They strike me as a far better choice than any managed fund I've seen so far, because of the lower charges, the fact that most managed funds underperform the index, and they're taxed more leniently than managed funds. Alternatively, you can open an account with a low-cost broker (e.g. www.directbroking.co.nz) and buy shares directly - that does require a certain level of knowledge though!

[Tia Maria]

Mark,

Thanks for your reply. I've had a chance to look at that Smartshares site and it seems just the kind of thing I was looking for, I'll just need to read up a bit about the NZ/Aus stockmarket.

At first glance, I think definitely not smartTENZ as it seems to have an over reliance on Telecom. I quite like the idea of investing in something that includes 'pumkin patch' shares as the Mum's round here are all pumkin patch mad.

Anybody know of an online NZ pension calculator? You know the kind where you put in your current age, preferred retirement age & preferred pension income and then they tell you you have to invest $zillion a week to acheve a miniumum income level!

Cheers

Tia

[NoelMC]

Thanks Marks for the replies, plenty to think about, but at least I don't have to hurry with any decision !

[MarkS]

Tia, I completely agree about smartTENZ. My approach if I were to be investing in Smartshares now would be something like 30% FONZ, 40% MOZY, 40% OZZY

Have you seen www.sorted.org.nz? Lots and lots of good online calculators, info, suggestions, etc.

[Avalon]

Great advice Mark and Avalon :)

I've got one small question for Mark - when you talk about people taking a cut to transfer money, do you mean I HAVE to use an agent?


Hey Hey - I can answer that:raebanana Sort of anyway. Look at the banks here - some of them do not charge a fee. If I remember rightly - you do have to use someone to bring it over. Im not 100% sure of this - because thinking about it - as long as you get it into an allowed fund here - I cant actually see why you cant DIY. But ive not come across anyone who has.

If you want to look at DIY transfers - ring your UK pension company and ask them.

If you decide to transfer via a company - check thier charges first and check that you are not signing any documents that say you have to pay up front. We used Britannia - which charged a % fee.

If we had gone with the bank (ASB) the transfer would have been free - but they wouldnt let us accesss any of the money till we were 55 - which was absolutely not what we wanted. The rules state you can take all the fund out in cash at this end if the pot is less than $20k, or upto 49% of it if the pot is over $20k.

Actually - that doesnt give a great answer to your question:( Sorry.

Hope its of some help anyway!

Hxxx

[MarkS]

The rules state you can take all the fund out in cash at this end if the pot is less than $20k, or upto 49% of it if the pot is over $20k.

Is that still the case? I thought that might have been one of the things that changed with all the new pension rules that came in April last year. Good news if it is still true!

[Avalon]

Is that still the case? I thought that might have been one of the things that changed with all the new pension rules that came in April last year. Good news if it is still true!

I dont think it did. We were a bit concerned as we were getting near the cut off - and when we spoke to the Uk pension companies they said that was not changing. But its a good point - people should check that before relying on my info:nice1

[Rabbit]

Mark

So, if one was say aged around 50, a person could make the voluntary pensions contribution to the UK as a non-resident for five years and get the tax relief (grossed up payment), then after five years UK non-residency transfer it to NZ (aged 55?) and then take the money tax free.

Have I misunderstood it? sounds like a good deal to me.

Rabbit

[MarkS]

I don't think it's quite as good as that. I'm pretty sure that under the current FIF rules, any exemptions on money in UK work-related pension only apply to money that's in there before you leave the UK - subsequent payments in are not exempt. I really don't know how that taxation would be applied though.

I've got a copy of the legislation saved, I'll have a look through now and see what I can find. Of course, it's the new FIF rules (due in April) that would be most applicable, don't think they've actually published the bill for that yet though!

[MarkS]

Right, I've had a look, but am not any less confused than I was before. The key file is the Taxation Act 2006 (http://www.taxpolicy.ird.govt.nz/publications/files/2006003p.pdf), but that forms amendments to the Income Tax Act 2004 (sorry, no link as I downloaded it ages ago, but you should be able to find it on the IRD site).

As far as I can see, any payments made into your foreign pension are exempt from the FIF rules only if you become resident after 1st April 2006, and only those payments made in the tax year you arrive, and in the following four tax years (see section EX 36 (2)).

So, you might conceivably be able to pay £2808 a year for four years into your UK pension, get it grossed up to £3600 courtesy of Her Majesty's Revenue and Customs, then transfer it to NZ, and after five full tax years out of the UK, withdraw the sum tax free for a gain of £3168. Definitely worth spending some money to consult a tax lawyer before doing this though - please don't make any decisions based on my ill-informed ramblings.

Of course, all of this involves some fine points of taxation law in two different countries - one where the law has just changed, and no one knows what's going on, and the other where the law is about to change, and no one knows what's going on! You might be better off just paying down the mortgage a bit...

[Rabbit]

Thanks Mark for the info.

My interpretation is similar to yours, but I agree it is a minefield and that people need to take professional and independent advice (watch out for Sharks).

That said, I looked at the QROPS list to help me get a better understanding.

ASB (the only one I have looked at sofar)

http://www.asb.co.nz/_pdf/transferring_UK_pension.pdf

My interpretation is that there may be a number of advantages dependent on age, date of entry, the number of years non-resident in the UK and timing of a transfer etc
Being non-resident in the UK for 5 years appears to be a key driver (to avoid withdrawal penalties, and avoid having to buy an annuity?)

It is all as clear as mud and the new or emerging FIF rules will not help, but there may be some positive opportunities for some :roll

[MarkS]

Yes, I've read that leaflet before, it's a good outline of the laws. There is one major thing it does leave unclear though. Point 8 says the QROPS has to inform HMRC of any withdrawals, and point 11 clarifies that the QROPS no longer has to inform HMRC once you've been non-resident for five complete tax years. However, point 9 says you have to inform HMRC yourself about any withdrawals, but it doesn't make clear whether your responsibility similarly lapses after five complete tax years.

I too went through the list of QROPS, and looked at quite a few of the websites. One things I noticed is that quite a few of the schemes force you to lock in your money until retirement age - so no chance of getting your hands on it early in that case.

All of this is a bit too much like hard work...

[Rabbit]

I guess another issue is motivation.

Some would like to get their hands on their pot to fund their lifestyle before retirement. The UK system is designed so that people can not take their money and potentially have to rely on the state once they have spent it.

The ASB leaflet gave me the impression that both dividends and capital growth are taxed at the marginal rate, whilst the fund is growing. Whilst dividends are taxed in the UK (THe Gordon Brown tax grab?), the capital growth is not.

Not being an expert, but a best approach might be to leave funds where they are, until a) five years non-residency has been attained, and b) reaching the age of 50 or 55? and c) The legislation of the day both in NZ and UK

The question then remains if one has liberated ones pot, and avoided the challenge of an annuity, then there is still the challenge of investing the money to provide an income in later life and the tax issues surrounding investments.

Annuity rates in the UK are pretty paultry say 4-5%, so I want to avoid that route.

The new UK rules did introduce the concept of unsecured pensions (a bit like income drawdown) and can help with avoiding the annuity trap.

So it is tax on dividend income and growth in NZ? (both pensions and savings - non-grey list).

The thing that does concern me is that the current FIF rules do not recognise the UK ISA wrapper. For those who arrive after 1st April 2006, this should not be a worry for four years. Future FIF rules may not recognise the UK Personal pensions wrapper, but if this did happen then there would be major outflows as people would not accept it.

So whilst my UK pension is still growing, I intend to leave it in the UK.

Perhaps if people do take professional advice, they could share it here.

[MarkS]

The ASB leaflet gave me the impression that both dividends and capital growth are taxed at the marginal rate, whilst the fund is growing.

Which bit made you think that? That's certainly not my impression, although I really don't understand yet exactly how funds are taxed in this country.

I mostly agree with what you say, although my own intention is to try to get the money free from the constrictions of the UK pension system as soon as I possibly can. The amount of changing of the rules that goes on is ridiculous, and I'd rather not be subject to it. For example, the unsecured pension rules only came in last April, and already the government has decided that too many people are taking advantage of them and have changed the rules.

It'll be interesting to see how the new FIF rules pan out over the next few years. It seems like there's a lot of working out to be done there - maybe we'll be lucky and they'll make it all a bit more favourable?

[Rabbit]

Mark

not sure if this is what I was looking at at the time...

http://www.superscheme.govt.nz/NR/rdonlyres/ED55480C-75E7-42EE-B084-AD27BB139D8E/29036/ASBMasterTrustInvestmentStatementAugust2005.pdf

See taxation summary on page 19.

As a correction to my previous statement, equity investments do not seem to currently attract capital gains (they have a dispensation), however property and some other funds do.

Still the dividend taxation rate (in NZ) seems in excess to what would be paid in the UK (22% from memory?)

Also, the less tax paid during the period of vesting leaves more money to earn capital growth compound.

NZ pension contribution rates are laughable compared to AUS and the UK, e.g. max 8% on Kiwisaver, versus max 150K per year in AUS (based on age), and max £220K? (100%) in UK.

As you rightly state, there is no ISA vehicle and the bottleneck is property investment. The NZ nation needs to diversify its asset classes away from property, and without inovative thinking it remains between a rock and a hard place.

In NZ it seems that making a few percent extra contribution to your pension (salary sacrifice) is considered as major tax fraud.

NZ needs to get real, not only with the rest of the world, but also in that they are late in the game in terms of making provision. So these paultry contribution rates offer little to those over 20.

For someone around the age of 50, Kiwisaver may offer a free icecream once a week but little more.

NZ needs to shift the investment asset class base and also offer opportunities for older people to prepaire for their old age - other than working until they are 80.

Also, with an aging population, taxation will need to provide for increased health care and social security provision, so all in all NZ could do well to adopt the UK system.

Yes, the UK will be adopting some form of Kiwisaver in the near future, but at the end of the day that is probably more about some form of compulsion for those who fail to make provision and fall back on the state.

Rabbit.

[MarkS]

Right, now I see what you mean. Don't forget that the tax rate of 33% will actually be your marginal rate after April this year - one of the drivers behind the new taxation laws was ironing out the inconsistency where people who were 19.5% or 39% tax payers were all paying 33% tax on holding in funds, but their marginal rates in direct share holdings.

Also, the new FIF rules will tax overseas investments as if they were earning a dividend of 5%. So any foreign shares held that pay (e.g.) a 7% dividend will be taxed more lightly than NZ or Oz shares paying a 7% div. Equally, foreign shares paying 3% will be taxed more highly than domestic shares paying 3%.

UK pensions are tax free on the way in, grow tax free, and are taxed on the way out, whilst NZ super schemes (like the ASB one above) are taxed on the way in, taxed as they grow, and are tax free on the way out. Those two approaches (aka FFT and TTF, respectively) are in fact roughly the same in the amount of tax they pay (and TTF has the advantage of being fairer across the population - FFT gives a big advantage to the middle class in the UK that the relatively less well off and the relatively rich don't get). It does of course mean that if you manage to move your pension over, you might get it tax free at all stages - a big bonus!

I definitely wouldn't transfer my pension into that ASB scheme though. One is that the charges are clearly rather high (so much so, they don't clearly put them in the leaflet!) The main one though is that you can't get your money out, except as retirement benefits (see section 8 there). That leaves you in serious danger of being taxed on your retirement benefits, as a QROPS is meant to do. I'm trying to find a scheme that will let me withdraw the entire transferred sum, as soon as I've got five complete tax years over here. Not completely sure yet that such a scheme exists though!

But assuming that UK pensions will not be taxed under the FIF rules (and I don't think it's completely clear that will be the case), clearly the most advantageous approach would be to leave it in the UK for as long as possible, then try to move it over here and out of the QROPS as late as possible. Not going to be easy...

[Trigirl]

Don't forget that the tax rate of 33% will actually be your marginal rate after April this year - one of the drivers behind the new taxation laws was ironing out the inconsistency where people who were 19.5% or 39% tax payers were all paying 33% tax on holding in funds, but their marginal rates in direct share holdings.

i think the new rules for funds actually allow lower rate tax payers to be taxed at 19.5% but still have 33% as the maximum rate for higher rate tax payers - so its not actually quite the same as your marginal rate.

[Rabbit]

"But assuming that UK pensions will not be taxed under the FIF rules (and I don't think it's completely clear that will be the case), clearly the most advantageous approach would be to leave it in the UK for as long as possible, then try to move it over here and out of the QROPS as late as possible. Not going to be easy..."

- sounds like the best strategy, based on my (limited) understanding.

- though get out of the QROPS as early as possible after transfer? e.g. take the UK pensions pot 100% tax free :) .

I am a working class lad, paying 39% tax so that may color my view. In my experience, higher rate (salaried) tax payers just work harder and earn less.


Rabbit

[Rabbit]

Issue: Exemption for new immigrants


Submission
(591 – Duncan Cotterill, 575 – Direct Broking)

The offshore proposals should not apply to portfolios acquired before immigration to New Zealand, prior to enactment.

All retirement savings held offshore by immigrants to New Zealand should be exempt.

Comment

A permanent exemption for new migrants on shares acquired pre-migration to New Zealand would be unfair vis-à-vis other New Zealanders. Officials note that these migrants will have sufficient time to adjust their holdings, to take into account New Zealand’s offshore tax rules, under the recently introduced four-year exemption from tax for new migrants (and returning New Zealanders) on their offshore investments. It should also be noted that most migrants will have experience paying capital gains taxes in other jurisdictions. In contrast, the fair dividend rate method would tax a reasonable dividend yield from their offshore portfolio share investments.

Recommendation

That the submission be declined.

From: http://www.taxpolicy.ird.govt.nz/publications/files/vol3offrep06.doc (page 74) as posted by Super_BQ

Is the exemption for new migrants a good deal or a mousetrap?

Perhaps, a bigger concern for those who arrived prior to April 2006? - should these changes be enacted. though longer term, eventually I guess they will impact us all?

As an aside, how would we include Gordon's tax grab into the computation?

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/10/15/nbrown15.xml

[Mr Brillo]

Have just read all of this, all really interesting stuff, but I feel getting the good advice of a (true) IFA who has both UK & NZ experience is the best approach. Don't try to interpret the increadibly complicated rules which seem to change all the time anyway!

BUT certainly not one of the firms who charge a % of your pension pot (that seems a complete ripoff to me).

I have looked at Tower, Asteron and also Pegasus. The most flexible seems to be Pegasus, but so far it would seem that all wish to lock in your money until you have been here for 5 years, want to replicate the UK rules re drawdown and all will report to HMRC on any withdrawals for the first 5 years. Just also look at the charges and fees - they seem much higher than the UK.

For all who arrived after April 2006 the tax exemption is great, but the exchange rate is also a huge factor which will affect when and if you move across. The focus in this thread seems to be on tax avoidance and how to get your cash out of the fund ASAP. Whilst I would not want to guess others' personal financial circumstances, I would leave the fund until absolutely necessary or until such time that I could draw it out legally and move it into an investment which gave me the highest NET return after tax, fess etc.

I agree that NZ needs to be more imaginative in its approach to spending and saving. The tax rules appear (because us brits are used much more sophisticted saving - I think??!! - or were we being hoodwinked) strange and do not encourage saving at all.

If anyone wants the details of the IFA we use, I would happily PM the details, though its totally up to you to do your own due dilligence!

[Trigirl]

so far it would seem that all wish to lock in your money until you have been here for 5 years, want to replicate the UK rules re drawdown and all will report to HMRC on any withdrawals for the first 5 years

these are UK requirements - brought in on 'A day' back in April 2006. if you want to move your money out of the UK it has to be to a scheme that abides by these rules. if the scheme you are moving to doesn't agree to abide by these rules then HMRC will penalise you heavily for moving your money out of the UK.

[alan999]

I'm struggling with this lot, and the amount I have isn't worth a lot of worry.

I have a private pension with standard life, paying in £150/ month.

I am 50, 51 in June and am coming over April 1st.

Can I just keep paying into it for five years, freeze it there and receive a pension in NZ in the same way I would have done in the UK?

Is there any massive saving to do it any other way?

Thanks,
Alan

[MarkS]

Alan, you should be able to receive your pension here in the just the same way as you would have been able to do if you stayed in the UK, only with the slight wrinkle of being subject to exchange rate movements. You could also move the money over here, and then because of the rules that the UK imposes on organisations here that receive the transferred pension, you'll have much the same set of restrictions that you would have done in the UK. You will have taken the exchange rate risk in one hit though, and the other potential advantage is you won't have to buy an annuity with your pension pot (I say potential as people have very different views on how good or bad annuities are). You will be taxed on money taken out of the pension pot post retirement though.

Most of the complications that have been introduced into this thread are regarding ways of getting money out of your pot (legally!) WITHOUT paying tax on it.

If you're looking at taking benefits from your pension within the next five years, you really should be thinking about getting some professional advice on this. Just make sure you find out how much money the advisor is going to earn from you!

[Rabbit]

Is there any massive saving to do it any other way?


There are no massive savings just future snakes in the grass to try and avoid in five years time.

If your pension is a Standard Life Stakeholder pension, then you do not need to continue contributing to it if you don't want to and it will continue to grow without penalty.

The thing you might have to watch is when you take your 25% tax free lump sum (you can take it now because you are over 50).

New Zealand residents are taxed on their worldwide income, as a new resident you will have an exemption on some aspects for five years.

If you take your tax free lump sum from your UK pension say when you are 57 then you may have a tax liability in New Zealand assuming you stay here in excess of five years.

[alan999]

Thanks for those replies.

So is a reasonable plan to continue paying into it, presumably my payments will still be "increased" by adding back the tax for say 4 1/2 years then stop paying into it.

Then be careful to take out the 25% lump sum before the 5 year deadline which I will not have to pay tax on, leaving the rest in to provide a pension (taxed) in the same way it would have been paid in England?

I much appreciate all your help.

Alan

[Trigirl]

be careful - the exemption on paying tax on income from overseas is 4 years from when you move to NZ

[Rabbit]

Alan

if a main concern of yours is about making future provision.

As of July they introduce a new pension scheme for the masses in New Zealand called KiwiSaver - a bit like a personal pension. The payments are deducted from wages at source, and are then passed onto a private sector provider who manages your Kiwisaver fund.

If you intend working here then you will be enrolled as of July into it by default.

The default contribution level is 4% with optional contributions up to 8%. From what I have read in the paper, it is possible that this limit could increase eventually as the government wants people to save more for their retirement.

So dependent on your New Zealand income, your contributions to Kiwisaver and the associated provision could easly match what you are doing now with Standard Life.

So if cashflow is an issue and you want an easy life, you could stop making your payments with Standard Life back in the UK (give them a ring to confirm) and go with Kiwisaver. Later on you could decide what you want to do with your Standard Life pension e.g. do a transfer, take your lump sum, whatever.

If you have access to Standard Life online services, you can request a statement of what the future value of your pension is based on the current size of the fund and future contributions. This insight based on the size of your fund and the projected benefits might help inform some of your thinking.

Good luck with it.

Rabbit.

[Rabbit]

be careful - the exemption on paying tax on income from overseas is 4 years from when you move to NZ

Trigirl is correct.

The following links provide further information.

http://www.ird.govt.nz/yoursituation-ind/earning-income/temp-tax-empt-foreign-inc.html

http://www.ird.govt.nz/resources/file/ebc73a411bfe97f/IR257.pdf

In terms of the last link (Guide 257) there may be a risk of continuing to contribute to a UK pension after immigration as it may conflict with the FIF rules?

Interested to here opinions from others on that.

[UktoKiwi]

Does anyone know of a Qualifying Recognised Overseas Pension Scheme(QROPS) that actually has an investment fund which is either a tracker fund, an index fund or cash interest only fund.

This type of investment is generally better 90% of the time especially when one takes into account the massively reduced costs and charges that are normal for a non discretion managed fund. The con that goes on with a managed funds charges is one of the biggest scams in the history of finance.

Basically I want to transfer my pension from UK to NZ but do not want to put it into a fund where a manager has discretion on investments with the crazy charges.

For instance I have found one or 2 cash type funds that invest in cash and fixed interest accounts but they return in the last year between 3% & 4% (the return may even be lower after other charges/fees). This is obviously disgraceful and almost fraud and theft in my mind when anyone can get 7%+ on various CALL accounts and even more with term deposits (raboplus at 7.8% for instance.).

Anyone found or know of a suitable Qrops qualifying scheme