Transferring your pension to New Zealand
The decision to transfer your pension when you move to a new country is one of the most important financial choices you will make.
Transferring your pension to your new country is optional, but there are a number of benefits in doing it. The process, however, can be complex, so if you want to save yourself a headache, in the midst of all the other things you have to think of during the move, there are plenty of pension transfer specialists that can help you.
What are the benefits?
Contrary to what happens in the UK, for example, in New Zealand you can draw down your retirement income whenever you want, by lump sum or regular payments. You decide how your funds are invested.
The UK government requires that you transfer your pension to a Qualified Registered Overseas Pension Scheme (QROPS) in New Zealand. This is usually done with no tax deductions. However, if you choose to leave your funds in your UK pension, you must declare that sum and pay tax on any growth made by your UK pension scheme on your New Zealand tax return.
If you intend to settle permanently in New Zealand, transferring your pension will allow you to enjoy your retirement income, when the time comes, without needing to worry about exchange rates.
Additionally, unlike what happens in the UK, in New Zealand, in the event of your death, your pension becomes part of your estate.
Can I transfer my pension?
To be able to transfer your UK pension to New Zealand, you must be a permanent resident of New Zealand and be either employed or self-employed in New Zealand.
How can I receive my UK pension in New Zealand?
There are two payment methods for getting a State Pension paid into New Zealand – the direct payment method or the special banking option.
Under the direct payment method you can choose to have your State Pension paid directly into your bank account every four weeks, 13 weeks, or annually if the amount is very small. This means that the payments you receive from the UK and New Zealand will change each month due to fluctuations in exchange rates. Plus, you need to pay tax on this and your New Zealand superannuation is reduced by the amount of your State Pension.
Under the special banking option, you can choose to have your State Pension paid into a special bank account that only Work and Income and the bank can access. In return, you get the full amount of New Zealand superannuation. Work and Income will pay you the full New Zealand benefit or pension weekly or fortnightly. Your payment isn’t affected by exchange rates and the tax is already paid for you.
Will this affect my superannuation in NZ?
In New Zealand, at the age of 65, you will receive a state pension (New Zealand superannuation) if you have lived in the country for a total of 10 years since you turned 20 and a total of five years since you turned 50. Any UK State Pension will be offset against your NZ superannuation entitlement.
If you are entitled to a pension or other UK state benefit, your New Zealand superannuation will be reduced by the amount of that pension or benefit. According to article 15 of the Social Security Agreement between New Zealand and the UK, the rate of New Zealand superannuation or other benefit must be adjusted by the amount of any benefit received under UK social security legislation.
There are rare instances when the State Pension does not affect the rate of New Zealand superannuation. You are able to receive both a State Pension and a New Zealand pension in full if you:
- Qualify for New Zealand superannuation or Veteran’s Pension without the assistance of the agreement between both countries; and
- You were a permanent resident of New Zealand on or before 1 January 1970; and
- On or before that date, you made contributions to the UK National Insurance scheme while living in New Zealand
You should not transfer your pension to New Zealand if you intend to return to the UK when you retire. Once you transfer your pension from the UK, you cannot transfer it back.
