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QROPS Jurisdictions in Focus : New Zealand

By Robert Burns BA (Hons), FCCA , Cert PFS - Sat 27th Aug 2011

So far my colleague Stephen and I have looked at Guernsey and the Isle of Man as jurisdiction for the release of your QROPS Pension. In our third article of our world QROPS tour we are inspired by recent press articles making all kinds of false comments about the supposed risks of taking 100% of the fund in cash after transferring benefits from a UK pension scheme to a New Zealand QROPS.

The same supposed risks have been repeated time and time again for almost three years without a single one of the predictions coming to fruition. The most recent claims we have seen are, as always, riddled with misinformation and are designed to scare rather than inform.

The main claim is that “HMRC will introduce retrospective legislation, applying massive fines to individuals who have withdrawn 100% of the fund transferred to a Qualifying Recognised Overseas Pension Scheme in New Zealand.”

One recent article agrees that “technically speaking, there are circumstances where it is possible to have the whole of your fund payable to you as a lump sum,” but then goes on to suggest that although to do so is within the rules, if the rules should change then a penalty of 55% of the value of the fund transferred may be levied retrospectively.

This is like saying that anyone over 50, but under age 55, who withdrew 25% of their UK pension fund in cash prior to 5th April 2011, which was within the regulations at that time, will now be liable to a tax charge of 55% as the rules changed making the minimum age to take benefits 55 from that date. Is that likely to happen?

Of course not ! - Because if you take benefits from any pension scheme, whilst complying with all the regulations at the time, you cannot be punished in the future if the rules then change. Apart from being the way pensions’ legislation is applied, it is basic common sense.

The legislation is very clear…. if you are a non UK resident you may transfer your UK pension fund or funds to a QROPS. During the first five tax years of non UK residence no more than the current UK levels of benefit may be taken from age 55 else a tax charge will arise.

However once someone has completed five complete and consecutive tax years as a non UK resident, it is the pensions legislation of the jurisdiction where the fund is based that then applies in terms of the allowable benefit structures with no UK tax applying. New Zealand legislation permits up to 100% of the fund to be withdrawn with no deduction of tax.

We cannot help it if this is how the law works nor if this is how it has worked for over five years.

What we can say is that many clients find this option highly attractive, but some other advisory firms for their own reasons do not. So if you are told anything other than this in terms of how the law works just ask to be shown the relevant legislation - silence will then ensue.

For further information about QROPS and Pension Planning opportunities please contact us today via clicking the link Here and leaving a few basic details on the form at the foot of the page.

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