Warning To All UK Pensioners Living In NZ
Transfer your UK pension now and avoid paying tax
In the UK, your pension savings and investment earnings are tax exempt, but your retirement income is assessable for taxation. This is known as Exempt, Exempt Taxed (EET).
In New Zealand, the money you contribute into your superannuation fund has already been taxed, and the superannuation fund manager pays tax on the growth of your superannuation funds. The capital at maturity is tax free.
Withdrawals from your personal pension fund in New Zealand are not treated as taxable income. This is referred to as Taxed, Taxed Exempt (TTE). When you are paid an Income for Life, it is not taxable.
DO NOT PAY MORE TAX THAN YOU HAVE TO.
On 1 April 2014, the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 came into force. The purpose of the Act was to make it easier to understand how much tax you are required to pay on your UK pension funds when you bring them to New Zealand.
The Act is retrospective, so if you didn't pay tax on a pension when you brought it to NZ, you have to now. From April 2015, the IRD became less tolerant to those who haven't 'come clean'. Tax penalties may be applied in this scenario.
Refer to the IRD table at the end of the Case Study which shows how your tax liability will increase each year after you cease to be a transitional tax resident.
The sooner you choose to transfer your pension funds, the less tax you will have to pay.
To identify your tax liabilities, we recommend that you seek advice from a specialist tax adviser. Contact Lyfords, who will direct you to a competent accountant. Your fee may only be $500 +GST for a report (from the accountant) telling you what you need to do.
Alternatively, ask your accountant if they have specialist knowledge in this area. You do not want to pay to train someone.