New option offered to pension transferers
New Zealand’s pension transfer industry is finding ways around rule changes that are making it more complicated for migrants to bring their savings to this country.
Thursday, June 9th 2016, 6:00AM 
1 Comment
by Susan Edmunds
Tony Chamberlain
Over the past few years, a new tax regime for pension transfers has been introduced, handing many migrants unexpected tax bills.
Then KiwiSaver schemes lost their QROPS status – which allowed transfers to be made without significant tax penalties. This also meant some transferred money became trapped and could not be used to pay tax bills.
Now the Financial Markets Conduct Act is set to tighten the rules on what withdrawals can be made.
From December 1, people in New Zealand will only be able to access about 9% of their British pensions at 55, down from 30% at present.
The biggest impact will be felt by those who transfer their pensions after that date – those who are already members of QROPS schemes will be able to access an amount of funds determined by their individual pension scheme and the date they transferred.
Tony Chamberlain, of GBPensions, said the FMCA changes would make the QROPS option undesirable to most migrants and could make the model obsolete.
He said a better option was to move the funds to a self-invested personal pension (SIPP), from which the entire amount can then be withdrawn.
He has recently started recommending it to people wanting to make a transfer and has so far helped four move their money.
The money remains in the UK while it is in the SIPP but he said there were ways it could then be transferred to New Zealand without UK tax.
“With careful tax planning you can get all the proceeds of a UK scheme paid to a New Zealand individual with no UK tax and only the same amount of tax they would pay were they in a QROPS.”
In some cases, the amount could be withdrawn without any tax from either country, he said.
There was a slightly higher cost associated with setting up at SIPP, he said. “But if you say ‘you can pay £2000 or £3000 and it can give you all your money or you can pay a bit less but you can only access some of it, people are willing to pay a bit more.”
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Having attended the IRD's International Tax update yesterday, they are now looking at what is a pension and what is a lump sum payment and how they might be taxed. The changes in rules in the UK has meant there is an opportunity for some to access the "LOT" but how long will this last??