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Thread: UK Pensions.

  1. #1
    essexbird is offline Junior Member
    Join Date
    Jan 2009

    Default UK Pensions.

    Hi All

    Can anyone help me with this one. I've just returned from nz, Got speaking too a x police officer from the uk, Who informed me that if i take my pension from the uk the goverment can tax me round about 49%. The lump sum I intend to take is only about 27,000.

    If this is the true are they loopholes to get around it i.e. off shore account.

  2. #2
    MotherBear's Avatar
    MotherBear is offline The missing link
    Join Date
    Jan 2005
    currently Ras al Khaimah, UAE, ex Wales, UK
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    I can't remember where I got this from but had it saved on my PC. I hope it's still valid and contains some answers for you.

    Before you leave the UK check your entitlement to the UK Govt pension and get up to date benefit statements of all your UK pensions - private and employer, so you have a current view of your pension situation.
    On 6th April 2006 new rules relating to the transfer of UK pension funds to overseas schemes came into effect, resulting in New Zealand Superannuation Scheme providers having to get specific approval from the UK HMRC to be able to accept transfers.
    If a transfer was to go ahead and went to a scheme that was not approved then the individual would be taxed at a rate up to 55%. In practice however as the UK pension provider would also be taxed on transferring to an unapproved overseas scheme, the likelihood of an individual getting the tax charge applied is remote.
    However as part of the same transfer rules the UK HMRC also introduced new rules on ways in which benefits can be taken from an overseas scheme and if these rules are broken the member would also face the above tax charge.
    Before the introduction of these rules an individual could transfer their pension to NZ and take up to approximately 40% straight out as a tax free lump sum, with the remainder being taken as a tax free lump sum at retirement (note no need to buy an annuity). This has now changed.
    The new rules now say that an individual can only take benefits as if they were being taken from a UK scheme. In other words you would have to wait until you reached at least age 50 (this increases in 2010 to age 55). However they then say that once you have been non-UK tax resident for the remainder of the UK tax year in which you first become non UK tax resident, plus another five years after that (in other words
    5-6 years after you arrive) that you can take lump sum benefits with no liability to any UK tax.
    This could be as much as 100% as a tax free lump sum although in practice most NZ Super scheme providers will have their own limits on what you can take. We would also not advice that no more than 40% be taken as a pension is for retirement planning, however the final choice and implications of this choice do rest with the client.
    UK personal pensions meet the NZ Inland Revenue Department QFPA (qualifying foreign private annuity) rules, so are not subject to FIF (foreign investment fund) tax this means that you will be taxed in New Zealand when you take benefits from the UK personal pension, but as long as you cease to make contributions to your UK pension funds once you are a New Zealand tax resident, you are not subject to any New Zealand tax on the pension until you take benefits from it.

    Consequently, there is no time limit where you have to transfer your pensions to avoid paying New Zealand tax on them. The relevant legislation is available from the Inland Revenue website, Inland Revenue - Te Tari Taake. Search for IR 257: Overseas Private Pensions.

    You will need an IRD Number for your employer, bank account, savings and investments. You can apply for an IRD number before you come out to NZ by visiting the New Zealand IRD here. When reviewing your financial situation you need to be aware of the NZ tax regime and I urge you to speak with a NZ Accountant before you leave the UK as you may able to reduce your NZ tax liability.
    A generous tax break is available to migrants to New Zealand for the first four years of their residency. Anyone arriving in New Zealand after 1st April 2006 and who qualifies as a "Transitional Resident" will be exempt from NZ Income Tax for four years on all foreign sourced income other than employment income and income from the supply of services.
    This means that investments held overseas that generate income, including dividends and interest, will not have this income taxed under NZ tax laws. This would also apply to certain types of pension funds held overseas.

    A Transitional Resident is a person who:
    has a permanent place of abode in New Zealand and
    was not resident in NZ for a continuous period of 10 years prior to acquiring that place of abode and
    has not previously been a "transitional resident"
    In plain English the "permanent place of abode" test is based on factors such as whether you are going to live here permanently, whether you have bought a house and how strong your association with NZ is (bank account, children at school, permanent job etc.).
    Mother Bear

    Try to bloom wherever you are planted.

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