Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


New IRD rules potentially savage British private pensions

New IRD rules set to potentially savage British private pensions - unless you act now!

By Simon Swallow
December 5, 2013

Almost no one has followed the IRD’s current foreign pension tax rules so they are proposing a new tax regime, mainly targeting the 250,000 plus British and Irish expats as well as all those Kiwi’s that have lived are worked in the UK.

The sweeping changes affect 1 in 11 people in New Zealand and are likely to either affect you, your friends, family (like sons and daughters that have travelled and lived in the UK), neighbours or work colleagues. The new rules are proposed to take effect on 1 April 2014.

The biggest impact of the rules is the massive tax savings if you transfer your foreign pension to New Zealand prior to 1 April 2014

The new rules propose an increasing tax rate on foreign pension lump sum payments or transfers with increases linked to the amount of time you have been in New Zealand. But they also state that if you transfer prior to 1 April 2014 you can elect a special rate that in most cases will be substantially lower than proposed post 1 April 2014 rates.

Tax saving from transferring your UK pension to NZ now versus after 1 April 2014
Pension value (NZ Dollars)
Years you have been living in NZ$ 25,000$ 50,000$ 100,000$ 250,000
25 6,118 12,236 24,473 61,182
27 6,668 13,337 26,674 66,685

So what’s changing?

The proposed changes clear up existing complicated rules on taxation of foreign pensions which have led to massive non-compliance, by proposing an income tax on a portion of a foreign pension transfer or lump sum payment. And the longer you have been living in New Zealand the higher the portion - ultimately, up to 100% of the value transferred or lump sum being declared as taxable income in your tax return.

But there is a gilt edged opportunity created in the rules, because the IRD recognises people have not been compliant with their tax obligations in the past they have stated that anyone who transferred their pension fund to New Zealand prior to 1 April 2014 will be able to elect to declare just 15% of the transfer as income in their tax return. The IRD have also given a way of way of meeting your tax obligation as well by allowing a withdrawal from your KiwiSaver to pay the tax.

So if you have been in New Zealand for longer than seven years you will have to declare more than 15% after 1 April 2014 so it might pay to transfer prior.

The perfect catalyst to assess your UK pension – many people find that their transfer values are often far greater than they expected

Many people with UK pensions may have lost touch with the amount of the pension might be worth when it comes to transferring the funds to New Zealand.This might be because they retired on a final salary scheme where they get a yearly statement showing the benefits (such as £5,000 a year in pension benefits).

Often these benefits when converted into a cash equivalent transfer value (“CETV”) can yield a high value (due to current low annuity rates). It is not unusual for the CETV’s to be 15 to 20 times the value of the annual benefits.

Case Study: Take for example Mr. Worth who worked for an oil company for 12 years some thirty years ago. When he left his final pensionable salary was just shy of £9,000, not bad for back then. Fast forward to 2013 and after taking into account inflation, really low interest rates in the UK and the fact that the pension scheme is fully funded and his pension has a transfer value of over £200,000 – that’s over 20 times what the final salary that he left on, more than he ever earned working there. By transferring his pension before 1 April 2014 Mr. Worth will have a tax saving of £60,000

But time is running out if you want to transfer and lock in tax savings

With an estimated $10B in UK pension benefits held by New Zealand resident expats and Kiwi’s that have returned the flood of interest in getting pensions into New Zealand has already started. The funds must be transferred into a Qualifying Recognised Overseas Pension Scheme (QROPS) in New Zealand of which there are a limited number.

As the average transfer time is 3 to 4 months for a UK pension to be transferred to New Zealand time is running out and with a limited capacity for New Zealand schemes to process these pensions capacity will be stretched going forward so the time to act is now so if you elect to transfer your UK pension you can do so before 1 April 2014.

If you or people you know are yet to transfer your pension to New Zealand you can find out more about the legislation and its impact here (

NOTE: It’s important to understand that State Pensions and those that have or are already being paid to you in New Zealand or to an account in the UK CANNOT be transferred.

If you have already transferred your pension to New Zealand you can find out by clicking here (


© Scoop Media

Business Headlines | Sci-Tech Headlines


Power Outages, Roads Close: Easter Storm Moving Down Country

The NZ Transport Agency says storm conditions at the start of the Easter break are making driving hazardous in Auckland and Northland and it advises people extreme care is needed on the regions’ state highways and roads... More>>


Houses (& Tobacco) Lead Inflation: CPI Up 0.3% In March Quarter

The consumers price index (CPI) rose 0.3 percent in the March 2014 quarter, Statistics New Zealand said today. Higher tobacco and housing prices were partly countered by seasonally cheaper international air fares, vegetables, and package holidays. More>>


Notoriously Reliable Predictions: Budget To Show Rise In Full-Time Income To 2018: English

This year’s Budget will forecast wage increases through to 2018 amounting to a $10,500 a year increase in average full time earnings over six years to $62,200 a year, says Finance Minister Bill English in a speech urging voters not to “put all of this at risk” by changing the government. More>>


Prices Up, Volume Down: March NZ House Sales Drop 10% As Loan Curbs Bite

New Zealand house sales dropped 10 percent in March from a year earlier as the Reserve Bank’s restrictions on low-equity mortgages continue to weigh on sales of cheaper property. More>>


Scoop Business: Chorus To Appeal Copper Pricing Judgment

Chorus will appeal a High Court ruling upholding the Commerce Commission’s determination setting the regulated prices on the telecommunications network operator’s copper lines. More>>



Cars: Precautionary Recalls Announced For Toyota Vehicles

Toyota advises that a number of its New Zealand vehicles are affected by a series of precautionary global recalls. Toyota New Zealand General Manager Customer Services Spencer Morris stressed that the recalls are precautionary. More>>


'Gardening Club': Air Freight Cartel Nets Almost $12 Million In Penalties

The High Court in Auckland has today ordered Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act. Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million ... More>>


Crown Accounts: Revenue Below Projections

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. More>>


Get More From Scoop

Computer Power Plus
Search Scoop  
Powered by Vodafone
NZ independent news