QROPS New Zealand – Relationship with NZ Pension Rules
QROPS New Zealand Relationship with NZ Pension Rules
QROPS New Zealand is Qualifying Recognized Overseas Pension Scheme, for persons who have permission to receive transferred UK pension funds in New Zealand. Each year many British expats choose to settle permanently in New Zealand. If these expats have contributed to a UK pension then their pension funds can be transferred to a QROPS. Transfers to QROPS New Zealand from a UK Pension are generally exempted from tax as also the benefits drawn down from the pension. It effectively means that QROPS transfers are tax free both for the lump sum and for money paid out, except under certain circumstances where full tax exemption may not be permissible.
State pension- where the contributor has already bought the annuity from the pension fund- is not eligible to be transferred to QROPS New Zealand. The rules of QROPS New Zealand are akin to the UK's HM Revenue Customs QROPS rules. The government actuary of New Zealand has confirmed to the providers that the UK's HMRC has written to the actuary accepting that the kiwi saver and superannuation schemes meet all QROPS compliance. On reaching certain criteria and strictly as per laid down rules some New Zealand QROPS schemes also pay out over 25% tax-free lump sum as an added bonus.
There are two main attractions in transferring UK pension rights to a QROPS. There is no compulsion to secure income with an annuity by age 75 and secondly the member's pension fund benefit can be passed on to the nominated beneficiary after death without any burden of taxation. QROPS New Zealand also offers capital distribution at levels better than UK schemes and most other QROPS jurisdictions. Regarding tax rules one key condition is tax recognition in the country where the QROPS operates. The UK pension fund contributions are tax free but with a rider regarding when and how one can take benefits from the fund. New Zealand resident members of pension schemes are taxed both on contributions and on emerging benefits. The pension funds are also taxed on income and capital gains. Double Taxation Agreement (DTA) between New Zealand and the UK provides for exchange of information between the parties and non-discrimination.
Compared to the UK, New Zealand has very little tax relief on contributions but access to QROPS New Zealand is very flexible. Most New Zealanders opt for pre retirement withdrawals from the superannuation funds. These funds are taxed during their growth; hence the lump sum withdrawals are regarded as tax paid so further income tax is not levied on the drawdown.