Comparison of UK and NZ Pensions

Each country is different and so are their pension / retirement savings schemes. The UK and New Zealand are no different. Below is a general description of UK and New Zealand pensions as they apply to New Zealand residents. This is not a full list and we can help further should you have further questions.

UK Pensions

  • UK pensions generally give you either a predetermined income stream based on how many years you have worked for the company, your salary when you left and other factors. These are generally called "Defined Benefit" or "Defined Benefit Scheme"). They could also leave you with an amount at retirement, depending on contributions, investment returns, fees and other factors which provides you with an income during retirement. These are generally called "Defined Contribution" or "Money Purchase").

  • With a Defined Benefit Scheme interest, if you live a long time your retirement savings will provide you with an income for the full length of your life (and, depending on the scheme's terms, the life of your spouse).

  • Some UK Defined Benefit Schemes may have certain guarantees as to the amount of the pension (which can be linked to and increased with changes to the inflation rate).

  • For Defined Contribution / Money Purchase Schemes, should you live for a long time (and depending on the amount of your retirement savings) you may have insufficient retirement savings later in your retirement.

  • Regular UK pension payments made to you will be assessed as income and will need to be included in your New Zealand tax return. This will apply regardless of whether it is a Defined Benefit or a Defined Contribution Pension.

  • At 55 years of age, you can withdraw up to 25% of your pension without UK tax.

  • Lump sums transferred by you may not attract any New Zealand tax if transferred in the first 4 years of becoming a New Zealand tax resident. If transferred after 4 years, then an escalating portion of the transfer value will be subject to New Zealand tax.

  • With Defined Benefit Schemes, your pension "dies with you and your spouse" - that is, the pension is structured so that payments end when you and your spouse have died. There is no lump sum to pass to your estate, but you do get the advantage of your spouse being able to receive a pension.

  • If you retain your pension in the UK, then bank transfer charges and exchange rate fluctuations apply to each payment sent to New Zealand. This can affect the value of your payments.

  • Any payments which are deemed "unauthorised payments" will be subject to UK tax and penalties.

New Zealand Superannuation

  • New Zealand Superannuation Schemes are similar to UK Defined Contribution or Money Purchases schemes in that they provide an amount of money from which you receive an income during retirement. There are however important differences regarding tax.

  • Like UK Defined Contribution Schemes, returns from investments in New Zealand Superannuation Schemes depend upon the performance of the scheme's underlying assets, fees charged, taxes and expenses recovered, and therefore will fluctuate and will affect the returns earned each year.

  • For a UK Defined Contribution / Money Purchase Scheme, the amount transferred to New Zealand (excluding fees) should be equivalent to the amount in the UK pension scheme. For a Defined Benefit Scheme, the amount transferred to New Zealand (excluding fees) is determined by the pension scheme trustees.

  • UK pensions transferred to the Garrison Bridge Superannuation Scheme or any other QROPS may not attract any New Zealand tax if transferred in the first four years of becoming a New Zealand tax resident. If transferred after four years, then n escalating portion of the transfer value will be subject to New Zealand tax.

  • In New Zealand Superannuation Schemes, income earned on your retirement savings is taxed. As the Garrison Bridge Superannuation Scheme is a Portfolio Investment Entity (PIE), tax is paid by the manager at your prescribed investor rate (PIR) on the Scheme's income which has been attributed to you, and there is no further New Zealand tax payable on withdrawal.

  • The Garrison Bridge Superannuation Scheme allows you to flexibly receive benefits (withdraw money) to suit you requirements from 55 years of age.

  • All payments made within 10 years of the transfer are required to be reported to HMRC within 90 days.

  • If you become seriously ill you may be able to access your savings straightaway, subject to meeting certain criteria.

  • Your superannuation account balance is paid to your estate when you die.