Having to factor in the Lifetime Allowance (LTA) and its tax implications was arguably a ‘nice problem to have’. Its repeal from 6 April 2024 will be welcome news for some investors – but what does it mean for expats wishing to transfer their UK pension to New Zealand?
Following the original announcement in the Spring Budget, in his 2023 Autumn Statement, the UK’s Chancellor of the Exchequer, Jeremy Hunt, confirmed the Finance Bill detailing how the LTA was to be abolished.
What was the Pension Lifetime Allowance?
The LTA was the maximum amount someone could draw from their personal and/or workplace pension/s during their life without having to pay extra tax.
The threshold was set at £1,073,100, and the rate of tax due depended on how and when someone withdrew the savings.
- 55% if it was taken as a lump sum
- 25% if it was taken in other ways, such as pension payments or cash withdrawals
These charges were removed from 6 April 2023, and now the allowance is being scrapped entirely.
Commenting generally on these changes, GBPensions director Tony Chamberlain says, “With the value of schemes rising, the LTA was a problem for an increasing number of pension scheme members. Its removal will almost certainly bring a sigh of relief for many, who might have altered their retirement plans merely to avoid being seriously affected by the potential tax payable under the regime.”
What does the removal of the LTA mean for people wishing to transfer their UK pension to New Zealand?
So far, this all sounds like really good news. However, in a classic example of “they giveth, and they taketh away”, British expats wishing to transfer their pensions shouldn’t celebrate the LTA’s demise just yet.
“When the team and I investigated this announcement more closely, we found that, for overseas pension transfers only, the UK Government is going to introduce an Overseas Transfer Allowance (OTA). Call it coincidence, but the threshold and tax penalties for this just happen to be exactly the same as for the old LTA.
“Despite some extensive digging online, I couldn’t find a date when this OTA comes into force,” adds Tony. “Obviously, we’ll keep abreast of developments and advise clients accordingly.”
Why GBPensions always recommends that clients seek specialist tax advice
The potential confusion with the removal of the LTA and introduction of the new OTA once again highlights just a few of the complexities of a UK to New Zealand pension transfer. GBPensions does not offer specialist tax advice – but works with industry professionals who have in-depth knowledge of both countries’ legislation. “We strongly encourage anyone considering whether or not to transfer their pension to regard these specialists’ involvement as an integral part of their decision-making process,” Tony confirms.
