Over the years, we’ve talked endlessly about the pensions industry’s “moving goalposts”. Financial lawmakers in the UK and New Zealand, His Majesty’s Revenue and Customs, and the IRD rarely (if ever) coordinate or give due consideration to each other’s financial regulatory changes. Generally, this results in widespread confusion, further delays to pension transfers, and a ton of extra paperwork. For example, let’s briefly reflect on the chaos surrounding the removal of the LTA.
Every once in a while, however, things take a rather more promising turn.
Proposals raised in the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill could have two quite positive impacts:
Firstly, people wishing to transfer their UK pension funds to an NZ QROPS (qualifying recognised overseas pension scheme) will be able to pay the potential tax liability from the fund itself rather than having to find the money from elsewhere (e.g., savings accounts, other investments). We know this has been a real barrier to transfer for some clients, so GBPensions absolutely welcomes this change.
Moreover, the schemes themselves will do the necessary calculations, any tax liability will be capped at 28 per cent, and no additional tax return will be required. It should be an altogether much smoother process. It’s also, arguably, a small victory for common sense, which happens far too infrequently!
Secondly, people who transferred their UK pension into a KiwiSaver QROPS scheme may finally be granted access to their funds.
Even before UK pension transfers to KiwiSavers were officially disallowed in 2015, GBPensions had always maintained they were contrary to QROPS rules. Why? Because KiwiSavers allow access to their funds before age 55 for specific circumstances: to assist with a first-home purchase or in cases of material hardship. This was a red flag; therefore, none of our clients had their pensions transferred this way.
Unfortunately, expats who were advised otherwise have effectively been in limbo for nine years. So, again, we welcome the proposed changes which will mean that, from April 2025, these people will be able to move their transferred funds (including any associated growth) into non-KiwiSaver schemes. This should give these investors greater flexibility and control of their funds.
Inevitably, there’ll be some bumps in the road before these changes pass into law. However, we’re looking forward to the new year with at least some optimism. And, of course, we’ll continue to provide updates on these and any other relevant legislative decisions.
