When it comes to transferring your UK pension to New Zealand, you have more than just paperwork and logistics to consider. Timing is a key factor in making the most of your hard-earned savings – for a key reason.
The four-year tax-free window
Whether you’re a UK expat who just moved to New Zealand or a Kiwi returning from the UK after an absence of at least 10 years, you can benefit from a four-year tax-free window on your UK Pension transfer.
What does it mean? In short, if you transfer your UK pension into a qualified pension scheme (NZ QROPS) within four years of the day you become a New Zealand tax resident, you won’t pay any local tax on the transfer. In some cases, those four years can be enough time to secure permanent residence before making this crucial financial decision.
What happens if you miss this period? You might lose a substantial chunk of your pension to tax obligations, which can run into tens of thousands of dollars. In other words, the transfer may be subject to New Zealand tax, and the amount of tax payable will be dependent on the calculation method used.
Whether you transfer within or after the tax-free window, once the transfer is complete, you’ll pay NZ tax on the income from your investment according to the Portfolio Investment Entity (PIE) tax rules.
Currency exchange considerations
Speaking of timing, you may think that you need to time your UK pension transfer to New Zealand to get a good exchange rate. But that’s not how it works.
Generally speaking, a transfer normally takes between three and six months, so the exchange rate when your money arrives is likely to be entirely different from when you started the transfer.
That said, a UK pension transfer does give you control over the exchange rate in a different way. When you transfer your UK pension to a New Zealand scheme, your money is still in pounds. Once received, you can either convert the money to New Zealand dollars, or leave your funds in pounds and convert all or some of it into NZ dollars when suits you.
This two-step process can help you make the most of favourable exchange rate, minimising the risks associated with currency conversion. At Pension Transfers, we work with foreign exchange specialists who can provide you with guidance and create a bespoke plan for you.
Get in touch: we’re here to help
Transferring your UK pension to New Zealand can be a complex decision. Our team at Pension Transfers, together with our partners, offer tailored advice to meet your unique needs and ensure you make well-informed choices every step of the way.
So, get in touch. With over two decades of experience and a proven track record, we can help you execute your transfer strategically and secure your financial future in your new homeland.
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.