Pension Transfer Pros and Cons

Transferring your UK pensions to New Zealand is a major financial step, and as with any decision there are benefits and drawbacks.

Many Brits who have settled in New Zealand and Kiwis who have returned to New Zealand after working in the UK find that the benefits of transferring their UK pensions to New Zealand outweigh any possible drawbacks, but we believe that you should make a fully informed decision rather than just hearing one side of the story. 

1. General Benefits of transferring your UK Pensions to New Zealand
2. Additional Benefits when you transfer your UK pensions to New Zealand with Broadbase International
3. Possible Drawbacks of transferring your UK pensions to New Zealand

General Benefits of Transferring your UK Pensions to New Zealand:

If you transfer your UK pensions to New Zealand the general benefits are:

You gain control of your pension

• You have the opportunity to access part of your fund before you retire, subject to QROPS rules on transferred pensions and the regulations of your New Zealand pension fund. We find that this is one of the main reasons that people transfer their UK pension to New Zealand, but we do stress the need to make adequate financial provision for your retirement,

• New Zealand pension schemes generally give you more investment choice than UK personal and occupational pensions,

• Your benefits cannot be reduced by your former employer or pension scheme administrators if your UK pension scheme faces a deficit,

• You're not obliged to purchase an annuity - at the retirement date of your New Zealand scheme (normally 55) you can take the remainder of your pension fund as a tax-paid lump sum. Not only will you not risk being obliged to buy an annuity when rates are low, you'll be able to pass any remaining funds in your pension to your beneficiaries in your will,

• You can usually take lump sums as you see fit once you're retired, rather than being limited to a 25% lump sum,

• There is no cap to the level of income you can take - even a UK personal pension is limited by the level of annuity income or limits on income drawdown, and

• There is no reduction in your pension fund if you decide to retire early - many UK final salary pension schemes reduce your fund value by 4% for every year you retire early. 

You benefit from ease of administration

• You can consolidate personal and occupational pensions into one NZ pension scheme, and

• It will be easy for you to keep up with pensions legislation and tax changes that may affect your pension (rather than trying to comb the UK news for relevant details).

You can eliminate exchange rate risk

• With your pension funds held in New Zealand Dollar-denominated investments, you eliminate the impact of currency exchange fluctuations and bank transfer charges on your pension income.

It's tax efficient

• Your pension can be taken as a tax-paid lump sum, with no further New Zealand income tax to pay - if you leave your pension in the UK you will be liable to NZ tax on any income you take from it. Find our more about NZ tax on pensions here.

Additional Benefits when you transfer your UK pensions to New Zealand with Broadbase International:

When you transfer your UK pension fund to New Zealand with Broadbase International, we can usually offer you the following valuable additional benefits:  

Protection from exchange rate fluctuations

• You can hold the majority of UK pension schemes in Pounds with our preferred New Zealand pension schemes, earning competitive interest, while you wait for the right exchange rate. UK pension providers can take anything from weeks to months to process pension transfer requests, and you have no control over when they send the funds to your New Zealand scheme - being able to choose when you convert your Pounds into New Zealand Dollars could prove very valuable to you.

A choice of pension schemes

• We are not tied to any particular provider. We have investigated the market thoroughly in order to be able to provide UK migrants and returning Kiwis the best possible advice. Some companies can only offer pension transfers to the scheme that they represent, and this may not be the most suitable scheme for your situation.

An unrivalled choice of investments

• You can virtually create your own pension fund! One of the options we offer you is the opportunity to access literally thousands of investment products from NZ, Australia, UK, Europe and USA. We can customise a pension fund just for you - an option which is restricted to a select few in the UK. We'll work with you choose and maintain your investments, and you can be as active or hands-off as you like. You receive regular updates on the performance of your pension fund, and regular advice on how to adjust your investments to best suit your objectives.

Expert, impartial advice

• We have been transferring UK pensions to New Zealand since 2002, and have extensive experience of UK and New Zealand financial services. Many NZ financial advisers offer to transfer UK pensions, but few have sufficient experience to give you the advice you need. At Broadbase International we take the time to make sure that you understand your options and we are committed to getting the best result for you.

Reasonable charges

• We fully disclose our charges from the outset, and believe that they are some of the most reasonable you'll find.

We transfer all types of eligible pension

• Some pension transfer services demand to know the size of your fund before they'll even talk to you - we'll investigate transferring any kind of eligible pension for you, large or small.

We offer a complete financial solution

• While we can just transfer your pensions, we also offer a full range of financial services specifically chosen for migrants from the UK and returning Kiwis, including mortgages, foreign exchange, investments, retirement planning, insurance, trusts and NZ & UK tax information.

Possible Drawbacks of transferring your UK pensions to New Zealand:

If you transfer your UK pension funds to New Zealand the possible drawbacks are:

You lose any income guarantees that may be built into your UK pension

• Your New Zealand pension fund value and therefore part of your retirement income will depend on the performance of the investments in your pension fund - you forfeit any of the income guarantees that may be built into your UK pension fund, and

• You also lose any spouses or dependants pensions, annual increases and inflation-linked increases that may be built in to your UK pension scheme.

NZ pensions are taxed on their growth

New Zealand pension schemes are generally liable to more tax than UK pension schemes as they grow - in New Zealand pension schemes investment income is taxed at the company rate of 30%, and investments outside NZ and Australia may be liable to New Zealand's Fair Dividend Rate tax.

This is quite a contrast to UK personal pensions, which grow almost free of tax - but as a rule New Zealand pension funds are designed for capital growth rather than income, so the NZ tax burden on most pension funds is relatively small. And of course, you can then take benefits from your New Zealand pension fund as tax-paid, with no further income tax to pay.

Most of our clients find that the opportunities afforded to them by having access to a larger range of high quality investments more than makes up for paying more tax on the growth of their NZ pension fund. Find our more about NZ tax on pensions here.

Pension legislation and tax regulations may change

• UK and/or New Zealand pension regulations, pension scheme regulations, and New Zealand and/or UK tax regulations may change at any time, and we cannot anticipate what the impact of these changes on your pension fund may be.

You can't transfer your pension funds back to a UK pension

• Once you have transferred your UK pension funds to New Zealand you cannot transfer them back into your UK scheme. This is the first reason NOT to transfer your UK pension funds to New Zealand until you are sure that you are going be living in New Zealand when you retire.

• If you do return to the UK to live, and the HMRC suspects that you transferred your pension funds to New Zealand without intending to retire there, they may impose significant tax penalties on your pension funds. This is the second reason NOT to transfer your UK pension funds to New Zealand until you are sure that you are going to be living in New Zealand when you retire.

Interested in finding out more about pension transfers to New Zealand? - read on for information on when you can transfer your UK pensions, and how to get started.

Please fee free to contact us if you have any questions about your UK pensions, and don't forget to order your free copy of our comprehensive UK Pension Guide.