These are schemes that meet the requirements of the UK’s HM Revenue and Customs. This means that transfers into them are authorised, and do not attract the potential tax bill that an unauthorised pension transfer can.
QROPS have some of the same rules as a UK pension scheme, such as not allowing benefits to be paid before the age of 55. But there is no inheritance tax associated with a New Zealand QROPS and withdrawals are tax-free.
When you’re deciding on what the right QROPS might be for your transfer, there area few things to think about.
What type of QROPS?
Most QROPS are either portfolio investment entity (PIEs) or platform investment schemes.
PIEs tax returns based on your prescribed investor rate (PIR) which is capped at 28 percent. That means that if your PIR is lower than your normal marginal income tax rate, you’ll pay less on your PIE fund than you would if the money was invested in a non-PIE investment fund.
A platform scheme can offer a wider selection of investment options, similar to a SIPPs in the UK, and can offer a bit more flexibility.
But non-PIE investments such as a platform scheme can be taxed at a higher rate via resident withholding tax (RWT).
Foreign investments held outside New Zealand are taxed under foreign investment fund (FIF) rules, which assume that the investment increases 5 percent a year and the investor pays tax on that.
New Zealand tax is not generally payable on a transfer into a QROPS if it is made within the first four years of the investor becoming a New Zealand tax resident.
Choosing a fund
If you decide to opt for a fund, you’ll need to assess your options to determine which is most suitable for your situation.
If you have many years of investing ahead of you, it may be appropriate to choose a higher-risk fund to deliver better returns. But if you need the money soon, you may be more conservative.
Finding the right fund for your risk profile will be key.
You may also like to compare fund performance. Although past performance is no guarantee of the future, you may be able to identify some longer-term trends.
Fees can also make a difference and it may make sense to compare what you might pay in each of the QROPS you are considering.
You’ll need to make similar decisions about risk and investment horizon via a platform, too.
Consider your currency
Another of the factors that may influence your balance is the exchange rate.
Transferring the money into New Zealand dollars when the local currency is strong may mean you receive less in your investment fund.
But your QROPS may be able to give you the option of investing your money in New Zealand dollars or in pounds sterling, which can help to manage some of your currency risk.
We can advise you on your options.
We are here to help
At Pension Transfers, we have an expert team of professional advisers who can help you to understand the factors that will go in to deciding on a suitable QROPS for you. Transferring your pension is a big financial decision and we can help you find a QROPS scheme and provider that fits with your goals.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.