Linda Sanders: Full scheme ahead

by Linda Sanders / 13 March, 2014
When transferring a foreign pension, choosing the wrong plan can be costly.
Given the average transfer value of British pensions is several hundred thousand dollars, many people will be pleased by the news that Inland Revenue has extended the deadline for transferring foreign pensions to New Zealand. That will allow more people to take advantage of the tax “amnesty” that had been due to expire on April 1.

Thinkstock


The change means anyone wanting to transfer an overseas pension to New Zealand just has to have kicked off the process to qualify for a discounted tax rate. The amnesty allows anyone who moves his or her foreign pension to declare 15% of its value as income. Based on top tax rates, the tax would be a maximum of 5% of the fund’s total value, rather than much higher amounts. So a $100,000 fund would have tax applied on $15,000.

What do you need to do to benefit? You need independent verification you’ve initiated the pension transfer process, including receiving a statement of transfer value and pension transfer forms.

The new time frame has also enabled the Government to pass the Taxation (Annual Rates, Foreign Superannuation and Remedial Matters) Act. This introduces the 15% option for those who withdrew a lump sum or made a transfer from their foreign superannuation scheme and didn’t comply with the rules at the time.

The 15% rate is a way of fixing the problem that most people with overseas pensions haven’t been meeting certain obligations to pay tax here – either through ignorance or because they don’t have the cash. Some people have also delayed transferring their funds because they can’t afford the tax and generally can’t take the cash out of their pension when it arrives.

Pensions get particularly complicated when you’re dealing with the various tax rules of different jurisdictions. In New Zealand you’re required to pay tax on the money you put into a fund, and on the interest earned and investment gains, but once you cash up it’s tax free.

In many overseas funds, however, your savings are tax-exempt but taxable when you cash up.

Foreign pensions are a minefield. A friend who emigrated from Canada – and worked here for many years before retiring – remains grumpy her Canadian pension is offset against her New Zealand superannuation, despite it being a non-state pension. She agrees one state pension should offset another but Inland Revenue tells her the pension is caught because the Canadian Government administers it – even though it has never put a dollar towards it. She wonders how many former compatriots evade the rules by not declaring their pension, or by leaving it in their home country to use when they visit.

Simon Swallow from Charter Square, who’s helped with a number of reader enquiries, warns people to be careful choosing the scheme to which they transfer their overseas pension.

He says although some KiwiSaver funds are Qualifying Recognised Overseas Pension Schemes (QROPS), they don’t necessarily provide all the ­benefits of transferring to a non-KiwiSaver QROPS. This includes access to your pension at age 55.

He deals with a lot of people who’ve received advice from accountants or advisers who think they know the rules but don’t, and who have been given wrong guidance. He says people should beware – the rules are complex, and getting poor advice can come at a high price, including paying more tax than you need to or missing out on all your entitlements.

Send questions to: money@listener.co.nz

Follow the Listener on Twitter or Facebook.

Latest

Excavated cult-horror film Suspiria is an ambitious failure
98994 2018-11-14 00:00:00Z Movies

Excavated cult-horror film Suspiria is an ambitiou…

by James Robins

Released in 1977, Dario Argento’s campy Suspiria was a landmark in cult horror. Now, director Luca Guadagnino has remade it in a new style.

Read more
Scottish-Bengali crime writer Abir Mukherjee on his 'cultural schizophrenia'
98517 2018-11-14 00:00:00Z Books

Scottish-Bengali crime writer Abir Mukherjee on hi…

by Craig Sisterson

Abir Mukherjee uses India’s painful struggle for independence as the backdrop for his Sam Wyndham detective stories.

Read more
Lunchtime legends: 5 hospo stalwarts on Auckland's restaurant evolution
93848 2018-11-14 00:00:00Z Auckland Eats

Lunchtime legends: 5 hospo stalwarts on Auckland's…

by Alice Neville

Restaurant veterans Chris Rupe, Krishna Botica, Tony Adcock, Geeling Ching and Judith Tabron reflect on the Auckland dining scene.

Read more
Best Auckland BYO restaurants where the food is good too
97751 2018-11-14 00:00:00Z Auckland Eats

Best Auckland BYO restaurants where the food is go…

by Metro

Head to one of these Metro Top 50 Cheap Eats and 50 under $50 restaurants for BYO dining that won't break the bank.

Read more
Get a lesson in mezcal at new Snickel Lane bar La Fuente
99033 2018-11-14 00:00:00Z Auckland Eats

Get a lesson in mezcal at new Snickel Lane bar La …

by Jean Teng

Mezcal was once regarded as a tipple for the lower-class – now it's the hero at new bar La Fuente.

Read more
Forget the love trysts, our relationship with China is a much bigger affair
98673 2018-11-13 00:00:00Z Politics

Forget the love trysts, our relationship with Chin…

by Bevan Rapson

Ross’s tape didn’t stand up his allegations of electoral fraud, but it helpfully drew renewed attention to questions about Chinese influence in NZ.

Read more
Bill Ralston: Simon Bridges looks like a dead man walking
98830 2018-11-13 00:00:00Z Politics

Bill Ralston: Simon Bridges looks like a dead man …

by Bill Ralston

The National Party’s ongoing ructions suggest a long spell in the wilderness lies ahead.

Read more
The history of NZ newspapers would shame the Facebook generation
98735 2018-11-13 00:00:00Z History

The history of NZ newspapers would shame the Faceb…

by Karl du Fresne

In the 19th century, there were more newspapers in New Zealand per head of population than anywhere else in the world says writer Ian F Grant.

Read more