Receiving UK State Pension Payments in New Zealand

If you are eligible for a UK State Pension you will need to find out more about how these payments are made in New Zealand, the possible implications of a UK pension payment on your partner's New Zealand Superannuation, and minimising the impact of bank charges and currency fluctuations on any payments you receive directly from the UK.

There are two main methods for receiving UK State Pension payments in New Zealand:

1. Special Banking

The most common payment method for a joint UK/NZ government pension is known as Special Banking. With Special Banking an account is opened in your name at Westpac that only the UK Pensions Service and New Zealand pension authorities WINZ have access to. Any UK pension you are entitled to gets paid into it, and WINZ top this up as necessary to pay your New Zealand Superannuation. You don’t need to worry about exchange rate fluctuations affecting your income, and any tax due on the overseas portion of your pension is sorted out automatically for you.

The only real drawback of this method is that you don’t get paid the excess if your UK payment exceeds your New Zealand Superannuation – but this is may change if the Social Assistance (Payment of New Zealand Superannuation and Veteran's Pension Overseas) Amendment Bill is enacted, as one of the suggested changes is that refunds be made available under the Special Banking option where the overseas pension payment exceeds NZ Superannuation.

2. Direct Payment

Another payment method is Direct Payment. Your UK pension is paid into your bank account using a currency conversion rate that is averaged over the previous month. WINZ then deducts this payment from your New Zealand Superannuation. The main advantage is that you receive any UK payments that exceed NZ Superannuation.

You need to declare your UK pension payments to the New Zealand IRD and you will be taxed on them. Your income may fluctuate with the exchange rate, but will not drop below New Zealand Superannuation (as it is topped up if it is. There can be issues with government pension payments that exceed NZ Superannuation affecting the rate of NZ Superannuation your partner is entitled to – see below for more information on this.

You can switch from one payment method to another if your circumstances change.  

You can find out more about overseas pension payment methods by contacting the International Services team at WINZ. You can find more about their services at www.workandincome.govt.nz/individuals/travelling-or-migrating/getting-an-overseas-benefit-or-pension-in-nz.html.

If your UK Pension is worth less than NZ Superannuation:

If your UK State Pension is less than New Zealand Superannuation, which is likely if you have not worked in the UK for your whole life, the UK portion of your pension will be forwarded to New Zealand, and automatically topped up to give you your NZ Superannuation.

In this case you should probably choose the Special Banking payment method for your pension. It keeps your income stable and also makes sure that the UK tax is sorted out for you.

If your UK Pension is worth about the same as NZ Superannuation:

If your UK State Pension is worth about the same as New Zealand Superannuation, particularly when exchange rate volatility is taken into account, you'll need to decide carefully which payment method you prefer.

If you are in this situation you probably need to contact the International Services team at WINZ for advice.

If your UK Pension is worth more than NZ Superannuation:

If the State Pension you would be eligible for in the UK is more than New Zealand Superannuation, you can opt to have your UK pension paid to you direct. This would usually only be the case if you spent most of your working life in the UK.

You will not get annual increases in your UK State pension once you have ceased to be ordinarily resident in the UK. This means that your pension will be “frozen” at the same rate as when you left the UK, or when you first qualified for the pension if you were already living in New Zealand at the time.

You are generally not eligible for special allowances, such as the Winter Fuel Allowance, when you are living in New Zealand.
Remember that you will need to declare your UK pension income to the New Zealand IRD and you will probably be taxed on it. You may also need to consider your partner’s pension payments – see below for further details.

Partners:

If you and your partner are both eligible for the UK State Pension you will both need to choose the same payment method.

New Zealand Superannuation payments are paid to you and your partner as a couple unless you are single. If one of you gets more UK State Pension than NZ Superannuation but the other is better off with NZ Superannuation, you may find that taking the UK pension payment reduces the NZ Superannuation payment. If you think this may affect you we advise you to discuss it with the International Services team at WINZ.

S2P and SERPS:

If you opted-in to S2P (State Second Pension/Additional State Pension), or its predecessor SERPS (State Earnings Related Pension) rather than contributing part of your National Insurance contribution to an occupational or personal pension scheme, the S2P/SERPS portion of your UK pension entitlement will be assessed by the New Zealand pension authorities to see if it was voluntary. If not, it will be folded in to your UK State Pension entitlement, rather than viewed (and paid to you) as a separate voluntarily funded pension.

Payments from the UK:

If you are transferring regular payments from your UK bank account to New Zealand you may find that bank overseas transfer charges really eat in to your income, and that currency fluctuations make it hard to predict how many Dollars you will get for your Pounds. This is particularly frustrating when you are on a fixed income. 

To find out about an alternative method for setting up regular payments from the UK, check our article on Regular Payments.

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.