What's Involved in Transferring a UK Pension to NZ

Investments UK Pensions

Timing and individual circumstances vary significantly. What applies to one person may not apply to another, and nothing in this article constitutes personal financial or tax advice.

A Question Many New Zealanders Find Themselves Asking

For people who worked in the United Kingdom before settling in New Zealand, the question of what to do with a UK pension is one that tends to surface eventually - usually around the time retirement planning becomes more pressing, or when someone first hears about the four-year rule and wonders whether they need to act. The short answer is that yes, transferring a UK pension to New Zealand is possible in many cases, but it is not a simple process and it is not right for everyone.

Understanding the options available, the rules that govern them, and the factors that bear on the decision is the starting point for making a choice that suits your individual circumstances.

The Role of QROPS in Overseas Transfers

UK pension legislation restricts where pension money can be transferred. In general, a UK pension can only be moved to a scheme that meets HMRC's requirements as a Qualifying Recognised Overseas Pension Scheme, or QROPS. This is a classification that certain overseas pension schemes in New Zealand have obtained by meeting specific criteria set by UK regulators. New Zealand remains on HMRC's QROPS notification list, with a number of eligible schemes available.

One important point for New Zealand residents: UK pension transfers to New Zealand generally need to go to a New Zealand QROPS provider rather than KiwiSaver. Not all New Zealand schemes qualify, and the list changes over time as providers apply for, retain, or lose the status. Before initiating a transfer, it is essential to confirm that the receiving scheme qualifies - otherwise the transfer may trigger significant UK tax charges.

UK Tax Considerations on the Sending Side

The UK has its own rules about what happens when pension money leaves the country. HMRC introduced an Overseas Transfer Charge in 2017, which applies a 25 percent tax on transfers to a QROPS unless the member lives in the same country as the receiving scheme. For a New Zealand resident transferring to a New Zealand QROPS, this charge should generally not apply - but the rules are specific and have been subject to change, including the removal of the EEA exemption in October 2024, so current advice is important.

It is also worth noting that the UK Lifetime Allowance was abolished from 6 April 2024 and replaced with new lump-sum allowance rules. The position for people with larger pension balances can be complex, and anyone in that situation should get current advice on how those limits may apply to their transfer.

New Zealand Tax Considerations on the Receiving Side

As discussed in the article on the four-year rule, New Zealand has its own tax treatment for foreign superannuation transfers. Depending on how long you have been a New Zealand tax resident, part of the transfer amount may be included in your taxable income here. The interaction between UK tax treatment on the way out and New Zealand tax treatment on the way in is one reason why these transfers benefit from careful, coordinated advice rather than a one-size-fits-all approach.

Exchange Rates and the Currency Question
UK pensions are denominated in pounds sterling. When you transfer to New Zealand, the value you receive in New Zealand dollars will depend on the exchange rate at the time of conversion. Exchange rates between GBP and NZD can vary considerably over time - a rate that seems unfavourable today may look different in six months, and vice versa. Some people choose to transfer in tranches to manage this exposure; others are comfortable with the rate at the time. There is no objectively correct answer, but it is a factor worth considering as part of the overall decision.

When Leaving the Pension in the UK Makes Sense

A transfer is not automatically the right outcome. For some people, leaving the pension in the UK and drawing it as income at retirement - potentially alongside a UK State Pension - may be a perfectly sensible approach. UK-based drawdown arrangements have their own rules and tax treatment, and drawing income from the UK does not necessarily mean paying UK tax if you are a non-UK resident, though this depends on the type of pension and any applicable double tax agreement between the two countries.

The decision to transfer or not to transfer should be made with a clear understanding of both options, not simply because a transfer feels more tangible or more comfortable from a distance.

The Process Itself

For those who do decide to proceed with a transfer, the process involves engagement with both the UK pension scheme and the receiving New Zealand scheme, completion of transfer paperwork, and there may also be a regulated advice requirement on the UK side, particularly for larger safeguarded or defined benefit entitlements. The timeline can vary significantly depending on the schemes involved. It is not a quick administrative exercise, and it is worth going in with realistic expectations about how long it may take.

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