My daughter worked for a short period in Britain about 20 years ago and there is a small balance in her UK pension account (about $500) which is not enough to warrant engaging professional advice.
In fact, I spoke to a firm that regularly advertises its expertise in transferring such funds to NZ and was told they charge at least $1000 so retaining them would be unwise.
Do you have any recommendation and is there a KiwiSaver provider you know will handle such a transfer of funds for little or no cost?
With New Zealanders heading to Britain in droves as part of their OE, many will return to New Zealand with some funds stashed in a UK pension fund.
Unfortunately, transferring pension funds from Britain to New Zealand isn't a straightforward exercise.
I asked Jocelyn Weatherall, an authorised financial adviser and director at financial advisory firm Rutherford Rede, for some advice on whether you can transfer a British pension into KiwiSaver.
"The short answer is yes, there are a number of KiwiSaver providers that are also QROPS which will accept the transfer of your UK pension," says Weatherall.
"A UK pension must be transferred to a Qualifying Recognised Overseas Pension Scheme [QROPS], a list of which can be found on Her Majesty's Revenue & Customs [HMRC] website; search QROPS on the HMRC website and choose 'Qualifying Recognised Overseas Pension Scheme [QROPS] List' from the search results returned. New Zealand QROPS are on about page 55.
"Not all KiwiSaver providers are QROPS and not all QROPS are KiwiSaver.
"Each QROPS will have different policies on minimum amounts and fees so it is worth shopping around; we are aware of KiwiSaver and non-KiwiSaver providers that have no minimum and no fee to transfer.
"When transferring any pension it is highly recommended to gain advice from a suitably qualified professional as the rules, regulations and tax ramifications in both New Zealand and the overseas country make this a complex and technical area; such things as exchange rate, investment approach, fees, tax and the type of pension you hold abroad and the benefits that come with each type of pension should all be taken into account.
"With that said, as you mention, for smaller amounts it may be uneconomical to gain such advice.
"There are KiwiSaver QROPS and then there are non-KiwiSaver QROPS; these two sets have different rules after you have transferred in. If transferring in to a KiwiSaver QROPS you are bound by the rules of KiwiSaver going forward and any changes to those rules imposed by current and future governments.
"A pension transfer does not count as a member contribution [for Member Tax Credit purposes].
"If you do transfer your pension to a KiwiSaver provider then you should be very careful when considering moving KiwiSaver providers in the future.
"Any transfer to a non-QROPS may trigger taxes in the UK.
"Transferring a pension amount to a KiwiSaver may limit the choice of KiwiSaver providers you can transfer to in the future and for a smaller amount this may make you think twice.
"There is likely to be New Zealand tax payable on any pension transfer to New Zealand which is dependent on the amount of time you have lived in New Zealand since working overseas; if transferring in the first four years of living in New Zealand there may not be any tax obligation.
"Any New Zealand tax obligation may be able to be withdrawn from your KiwiSaver to pay to the IRD without penalty."
This advice is backed up by Stephen Jonas, head of client services at Craigs Investment Partners, one of the providers operating a QROPS KiwiSaver scheme.
"The benefits of transferring a UK pension need to be considered carefully, as what seems simple on the surface can be more complicated when you look at the particular details for an individual," he says. "There is no single hard and fast rule that will fit all individuals.
"Hence, you will always be told to seek professional advice before transferring a UK pension.
"Prior to any advice being given, details of your existing scheme will need to be obtained and considered. Therefore, the process for transferring a UK pension to a NZ scheme can be extremely time-consuming.
"This makes the process expensive and uneconomic for smaller value pensions. However, if the balance of your UK pension is small (ie, less than 10,000 ($19,700) when you can access the funds) you could consider leaving the fund with your UK provider.
"Then, when you reach the age of entitlement, and this could be when you turn 60, you could apply for a trivial pension withdrawal. Through this withdrawal you should be able to receive your balance as a lump sum payment, less any UK-based tax."
"There are conditions and criteria that apply," Jonas says, and recommends the HMRC website at http://www.hmrc.gov.uk/pensionschemes/small-pen.htm as a good source of information.
Weatherall adds that if you are at all in doubt it's important to seek independent advice, likely to be charged on an hourly fee basis rather than a percentage of transfer.
Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.
To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose, helentwose@gmail com.
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