The 7 Traps to Transferring Your UK Pension Funds

There are very good reasons for transferring your UK Pension to New Zealand. But you will see after reading the section "Comparison between NZ and UK Pensions" that there are some differences.

When transferring your UK pension there are some simple Transfer Traps to avoid.

Pension Transfer Trap One

From 1 April 2006 pensions from the UK must be transferred into a Qualifying Recognised Overseas Pension Scheme (QROPS). If you transfer your pension into a non QROPS scheme you will have to pay UK withdrawal tax of up to 55%. We transfer your UK Pension into HMRC approved QROPS funds.

If you withdraw money from a QROPS before 6 years are up you may be up for an unauthorised payment charge. This is a UK Tax charge and can be up to 55% of the amount withdrawn. QROPS approved New Zealand superannuation fund managers do not want to loose their QROPS approval status. One of the requirements to continue to be approved is that the NZ scheme must notify the UK authorities of any withdrawals.

There are some exemptions to this which you may qualify for, we can discuss this with you.

Once you start drawing down on your pension fund in the UK it cannot be transferred to New Zealand. You need to be a permanent resident of New Zealand before you can transfer your UK pension and you must not have started to draw down.

Delaying your decision because of the exchange rate. If you have concerns about the exchange rate then discuss this with us. We can give you a consensus of the 18 month outlook for the UK/NZ exchange rate. There are many factors impacting the exchange rate. If you are really concerned we can transfer your funds and retain them in UK pounds until you instruct us to transfer into NZ dollars.

The Savings Trap. After transferring your UK Pension to New Zealand you may want to continue saving. If you save into the scheme you used for the transfer, and you later decide to make a withdrawal within six years, any withdrawal will be treated as withdrawing the UK portion first. You could be liable for the 55% tax charge on the amount withdrawn. Solution save into a separate scheme.

Being too Conservative. If you are retired we recommend a "balanced" risk/return profile. This is a 50:50 mix of growth (shares, property and future funds) and income (cash, fixed interest). Even at 65 you probably have another 25 years of investing. You need to make sure your investments and retirement income is inflation hedged. If you are younger than 55 a "growth" risk/return profile may be more suitable. We will discuss this with you.

Not reviewing your investments. We believe its important to keep track of your investments and review asset allocations to ensure your risk/return profile stays within its limits. We will provide six monthly reports and an annual review.