Case Study: Transferring a UK Final Salary Scheme to a NZ ROPS (Mike)

Mike’s Story

 

It is a common view that those in a UK Final Salary Scheme should not transfer their pension to any other type of scheme. Mike, a 46 year old immigrant from the UK came to see a Saturn adviser to explore his transfer options thoroughly before making a decision.

 

Mike immigrated to New Zealand with his children, Brad now aged 19, and Jennifer now aged 17. Mike has settled in New Zealand and has no intention of returning to live in the UK.

 

Working with his adviser, Mike set out to refine his goals and his ideal scenario with regards to a potential pension transfer:

 

  1. Retire at age 55
  2. Minimise his tax liability in both countries
  3. Retain some sterling denominated investments
  4. Ensure his children continue to receive his pension benefits should he die

 

It was explained how each of these factors would be treated if the benefits remained in Mike’s UK scheme or if his pension was transferred to a NZ ROPS*.

 

Other Considerations

In addition to Mike’s main goals the following issues were explored.

 

Index linked benefits:

The UK scheme offers Mike an income that is linked to the rate of inflation in the UK. As Mike will retire in NZ he may prefer his pension fund to be more aligned with the New Zealand economy.

 

Foreign Exchange Risk:

Transferring his pension to New Zealand may help to insulate Mike’s pension from currency fluctuations. If Mike draws an income in New Zealand from his UK Scheme his income will vary from month to month depending on the current exchange rate.

 

Mike’s adviser clearly laid out the risks and benefits of transfer versus the guarantees offered by Mike’s UK Final Salary pension scheme and Mike was able to make an informed decision.

 

Pension transfers are an extremely complex area, requiring advice based on your personal circumstances.  You should seek advice from a specialist in UK pension transfers and also independent tax advice before proceeding.

 

 * Recognised Overseas Pension Scheme, approved by Her Majesty’s Revenue and Customs (HMRC)