How Safe is Your UK Pension?

It has been estimated that there is around £103 billion over 3,700 UK pension schemes in deficit compared with 1,800 in surplus. There are close to 11 million Brits holding defined benefit pensions. Out of that number it is estimated that 3 million will encounter problems and potentially have only a 50% chance of receiving their promised pension.

The Guardian reported in January 2018 the impact of the failure of the Construction firm Carillion and the implications on the security of other UK Pension schemes.

Carillion’s liquidation has fuelled concern about the financial stability of other big companies. The sprawling construction and outsourcing firm had a pension deficit of £580m but is now likely to rise to at least £800m because it no longer has a solvent business standing alongside it. The company’s crash into liquidation has thrown the spotlight on other firms with huge pension scheme deficits such as IAG, BT and BAE

The Guardian article also discusses the lower returns that UK pension funds are now facing. Deficits have swollen because companies have to calculate their future pension liabilities using safe assets, such as gilts (government bonds).

The companies with the biggest deficits, according to a
report last year from pension consultants LCP, are Royal Dutch Shell, BP, BT and BAE Systems. The four FTSE 100 companies each had a deficit of more than £6bn in 2016.

For Brits who were in UK occupational schemes instead of receiving the actual return of your pension investments, you may have only been credited with the lesser of 5%pa, or the Consumer Price Index (CPI). In the last few years CPI has averaged around 2%pa. Your former employer can legally keep any additional increase. For example, a well-managed pension fund could easily have earned 8-12%pa since 2015 and your pension account may have only grown by effectively 2-5%pa.

By moving your UK pension funds to New Zealand there are major benefits around control of your returns and security.
November 2018

Pension Transfers Too Generous

Pension transfers too generous, says regulator

The BBC ran an article in August that the UK Pensions Regulator has written to 14 pension companies providing "defined benefit" retirement schemes encouraging them to consider making reductions in payouts. Some schemes have been offering higher payouts to decrease their risk as people are living longer. The problem can be those left in the schemes, the companies may not be able to meet their commitments.

While there are disadvantages to transferring out of a defined benefit scheme there are also some major advantages to. We will discuss these with you.

The 4 Year Tax Free Rule

What is the 4 Year Rule

A key reason British Immigrants transfer their UK Pension as a lump sum to New Zealand is to reduce the expected amount of tax they are liable to pay. In New Zealand, versus the UK, money withdrawn from a QROPS superannuation scheme (from the age of 55) is tax free.

If you transfer your UK Pension within four years of becoming a New Zealand resident you will not pay tax on the amount transferred. If you transfer later there is a sliding tax liability, Refer to our Tax Liabilities Table