- About us
- Country Guides
- Financial Services
- Contact us
New Zealand remains an extremely popular destination for British expats. The stunning nature, friendly local communities and vibrant culture make New Zealand a top choice for relocating Brits.
When moving overseas one of the most important considerations is financial planning. This article has been written to provide you with information on your entitlement to the UK state pension along with your options regarding your workplace pensions held in the UK.
National Insurance contributions are often dubbed the ‘best investment you can make’, and with good reason. By simply continuing your NI contributions when overseas UK expats retain the right to receive the full state pension when they reach 65 (subject to change), wherever you are in the world.
To receive the full state pension which is currently £168.60 per week from age 65 onwards, a minimum of 35 years contributions are required. Expats can make voluntary overseas contributions for as little as £3.00 per week to help meet this requirement. Expats can also backdate missed contributions.
There are two types of UK workplace pensions. Firstly, defined contribution (DC) schemes, where both the employee and employer contribute. The contributions create a pension pot that is invested by the scheme’s fund management team, into a range of assets including gilts, stocks and shares and corporate bonds. Most DC schemes allow members to dictate how their pension pot is invested with a pre-defined range of options. The investment can be cautious, balanced or adventurous and allows for members to attempt to grow their pension pot.
Secondly, defined benefit (DB) schemes. The amount scheme members receive from their DB pension in retirement is calculated actuarily based on years of service and your final or highest salary. Defined benefit pensions pay out a fixed income each year which increases in line with inflation.
Fixed income – With a DB scheme you will receive a regular income, which will continue until you die. With DC schemes, this is not the case, the pot can run out.
Inflation proof – DB schemes pay members more each year based on inflation.
DB schemes offer your spouse a continued amount upon your death – usually under 50%.
Tax – DB pensions are treated relatively favourably regarding tax relief.
Flexibility – DB schemes offer you a fixed income for life. This could be £40,000 per year in retirement. Many people chose to transfer their pension as it allows for ‘front loading’ meaning whilst you are younger and fitter you can use a higher proportion of your pot to travel or invest.
Inheritance – Upon the death of you and your spouse, your entire DB pension dies also. Those who transfer their pot take full ownership of their pot and can assign the remainder of their pot to their beneficiaries.
Employer security – The majority of pensions are paid in full, however, unfortunately, each year, some companies go bankrupt. Meaning that the DB scheme’s liabilities may be passed to the Pension Protection Fund.
Your health – Those who live longer stand to benefit more from a defined benefit scheme. However, not everyone lives until 100, and those with lower life expectancies for whatever reason may wish to use a greater proportion of their pot at a younger age.
Currency volatility –Drawing down from a Sterling pension overseas leads to currency risk. Whilst Sterling is strong, your income will be high and vice versa. This can mean planning for fixed bills i.e. rent is difficult as the amount you will receive changes each month. Many expats move their pensions into their local currency to avoid this.
Upon moving from the U.K. to New Zealand we recommend reviewing your UK pension with a specialist. Taking advantage of a complimentary consultation will allow you to gain a full perspective over your pension.