New Zealand QROPS pensions – do they stack up for those not living there?

Maybe I am just missing something, but I can still see (2015) offshore advice firms suggesting New Zealand QROPS pensions are really suitable for those not retiring in New Zealand and I am not sure why.

The HMRC dropped a large number of New Zealand QROPS pensions from its bimonthly list in May, Kiwisaver schemes disappeared. The primary reason appears to relate to the ability to access income under the age of 55. However , the New Zealand Superannuation Funds remained on the list as they are open to non- New Zealand residents and these are still being promoted to non-New Zealand residents.

New Zealand QROPS pensions. Why?

Why would someone with a UK pension, not resident in New Zealand, want to transfer their pension to the other side of the world?

Let’s look at some of the reasons people consider when moving a pension from April this year.

Pension Flexibility

People may like the idea of total flexibility to take as much capital and income from their fund as they want after the age of 55- Is that a reason to move to New Zealand QROPS pensions?

No- As at June 2015, the only schemes that offer this are UK pensions ( not all ) and EU QROPS that have changed their rules.

Currency Risk

It is possible to select different currencies, when investing in UK pensions and QROPS, to protect the investor from currency risk – Is that a reason to move to New Zealand QROPS pensions?

No- All the funds that I have seen are denominated in New Zealand Dollars or UK Sterling. By definition someone that does not live in the UK is not going to be using pounds to live on or, if not in New Zealand, New Zealand Dollars.

Greater Investment Options

An oft cited reason for transfer, rarely used, is the ability to select a very wide range of investment options- UK SIPPs and QROPS offer this- Is that a reason to move to New Zealand QROPS pensions?

No, the schemes on offer normally offer a limited choice of investment manager- certainly self investment is not on offer. The offer is one or two fund managers who then offer a specific strategy which is restricted.

Tax Free Income

Avoid tax by transferring to a New Zealand QROPS pensions. Really? Unless someone lives in a no tax jurisdiction, then a New Zealand QROPS pensions, that is not taxed at source, will invariably need to be declared in most jurisdictions.

And, in these cases, won’t the restricted investments and non-aligned currencies wipe out any perceived tax advantage and potentially prove to be the more costly option?

There may be occasions where someone, who ives in a place with no suitable tax agreements and no income tax on pension income, may look at New Zealand QROPS pensions. For this very niche market, perhaps a New Zealand QROPS pensions might be the right answer. However……. Don’t let the perceived tax dog wag the tail of the pension!

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

About the Author

Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

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