Q. I worked in the UK for several years before returning to New Zealand in 2008. I joined KiwiSaver when I got my first job back here but am not currently working. I was contributing to a pension scheme in the UK and my balance is close to £3000. I have seen advertisements for "UK pension transfers" and wonder how this works.
A. The UK Government allows the transfer of pension funds to certain schemes in other countries that meet their criteria.
Contact your KiwiSaver fund manager and ask if they are a "QROPS" - or Qualifying Recognised Overseas Pension Scheme. Many have QROPS status (it's pronounced "kewrops").
Explain to them what you want to do and they will tell you what you need to do. I made a quick check on several fund manager websites and have concluded that most will be very happy to have your funds transferred across, and will assist you at no charge.
There are some snares to look out for, however. The UK Government has put certain restrictions in place with regard to making withdrawals once your funds have been transferred. Your KiwiSaver manager is required to let Her Majesty's Revenue and Customs know of any withdrawals, payments or transfers made from your account for up to 10 years from the date of transfer, and a tax of up to 55 per cent may be imposed.
This penalty period applies if you have been a UK tax resident at any stage during the previous five tax years. Any withdrawals (such as hardship, first home or reaching the age of 65) made from your KiwiSaver are presumed to be taken first from your UK pension-transferred funds. Get expert advice if you think this may affect you.
If you decide to go ahead and transfer your pension funds, you will get the exchange rate on the day that your funds are transferred to New Zealand. Once upon a time you may have got close to $9000 for your £3000 but currently it is less than $6000.
Sterling has been weak for some years now, and I am not brave or foolhardy enough to predict where it is heading. That is a call you will have to make for yourself. On the upside, by transferring your UK pension here you can consolidate and reduce the "paper war" that comes with having multiple accounts here and abroad.
I note that you are not currently working. If this means that you are not currently making any contributions to your KiwiSaver you will not be getting any Member Tax Credits either.
Members receive 50c in MTC from the Government for every $1 they contribute, with the maximum MTC credits being $521 over the 12-month period to June 30 each year.
Will the transfer of your UK pension funds into your KiwiSaver count towards Member Tax Credits? I put this question to an IRD spokesman, who said: "Under current law, MTCs will be claimable on monies transferred in under QROPS, in the year of transfer." So transferring £3000 should give you full entitlement to MTC credits in that year.
Everyone should check their KiwiSaver balance in July or August each year to make sure that their fund manager has claimed the correct MTC on their behalf.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not intended to provide personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email email@example.com.