Make the most of Currency Fluctuations when you Transfer your UK Pension

The exchange rate can make a significant difference to the value of your UK pension fund when it is transferred to New Zealand. At Broadbase International Ltd we offer you the ability to choose when you convert your UK pension into New Zealand Dollars, a facility that can add extra Dollars to your pension fund.

In fact, most of our pension transfer clients over the past 7 years have saved more using this facility than we have charged them for the transfer.

One way of doing it...

Some pension transfer services automatically convert your transferred UK pension funds into New Zealand dollars when they receive the funds, at whatever the exchange rate is on that day. UK pension providers can take anything from weeks to months to process your transfer request, during which time the exchange rate can fluctuate considerably - and not necessarily in the direction that you want it to.

Another way of doing it...

A few other pension transfer services allow you to hold your transferred funds in Pounds, but they then take three days (and pages of paperwork!) to complete the switch of your fund from Pounds to Dollars. You get the exchange rate at the time the transaction is processed rather than when you asked for it - the rate you wanted may be long gone.

The best way of transferring your UK pensions

With our preferred New Zealand QROPS your transferred UK pension in GBP cash account, earning a competitive rate of interest. Once you're ready, you can arrange to change your Pounds into New Zealand Dollars with just one phone call - there is no need fill in forms. This could save you a nail-biting wait watching the exchange rate fluctuate and wondering exactly how many Dollars you'll get for your Pounds.

The process works slightly differently depending on the scheme you have chosen and the size of your transaction - and we can guide you through this in more detail once we have determined which New Zealand QROPS is best for you - but you can rest assured that you'll get a very competitive exchange rate, very close to the Interbank rate (which is the rate that banks use to transfer money before any margin is added - basically a wholesale exchange rate).

As with all exchange rate gains and losses, you are liable for New Zealand tax if your foreign currency investment is held through a New Zealand superannuation fund. In this case, tax will be calculated by the superannuation scheme manager, and will generally be payable on both realised and unrealised foreign exchange rate movements, at the applicable tax rate of the fund (this will typically be 30%, but may be lower depending on the NZ tax status of the fund and the investor).

• If the NZ Dollar rises against the Pound over the period, you may get a tax refund on the exchange rate loss (as the investments will be denominated in Pounds), which will be automatically credited to your account in the Fund.
• If the Pound rises against the NZ Dollar over the period, you will be taxed on the exchange rate gain (again, as the investments will be denominated in Pounds). The tax will be automatically debited from your account in the Fund.

For example:

One of our clients recently transferred £228,000 from his UK pension scheme to New Zealand. On the date the funds arrived in New Zealand the exchange rate was 2.54 NZ Dollars to the Pound. This would have given him a pension fund of $579,120 in NZ Dollars. By transferring his UK pension fund, in Pounds, to a New Zealand superannuation fund, we were able to keep his retirement savings in Pounds while he waited for a better exchange rate. The New Zealand dollar value of his investment, a couple of weeks later, at an exchange rate of 2.89 NZ Dollars to the Pound, was $658,920. While he would be taxable on the exchange rate gain (in the Fund), he received $79,800 (plus interest!) more than what he would have received if his funds had been converted into NZ Dollars when the funds arrived in New Zealand.See our article GBP to NZ Dollar exchange rate volatility over short and long periods of time for more information on the benefits of being able to choose when you can change your hard-earned Pounds into Dollars.

Interested in finding out more about pension transfers to New Zealand? - read on for an introduction to the rules and regulations that govern UK pension transfers to NZ.

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.