NZ Financial Advice

[Snowbadger]

Hi guys,
On holiday in a wonderfully sunny NZ. My brother in law at the age of 56 has asked me for advice on retirement in 9yrs time. I can give him advice on basic principles but my googling shows NZ is a completely different tax environment. Also there are the complications of pensions in the uk and NZ for both him and his wife. So, starting with UK pensions, what advice can anyone give on the pitfalls involved.
I hasten to add that he needs an IFA but I would like to give him some questions to ask.

As always, thanks in advance,

SB

[vandefrosty]

I left NZ in mid-90s but investments there, and the prospect of returning one day, keep me interested in NZ tax situation - and pensions to a lesser extent.

Here are a few things that might help prompt a discussion. Since they're derived from recollections and past experience, they may not be fully accurate - check all of this out with an expert, or otherwise satisfy yourself, before acting on it.

• There is no capital gains tax.
• But there are special rules for income earned from foreign investments (the FIF regime), where residents are taxed on a deemed rate of return [thanks to a particularly socialist interpretation of tax theory by NZ's early 2000s equivalent of Gordon Brown.]
• New residents of NZ are exempt from NZ tax on income from foreign sources for 48 continuous months from their first arrival. The exemption applies only once, and isn't reset for periods subsequently spent outside NZ during the 48 months.
• I've seen google results that suggest UK pensions can be brought to NZ as tax free lumpsums under this exemption, but I have no idea of the practicality of this, whether that information is still current, and how that would work at the UK end.
• I believe that NZ recipients of UK state pensions receive amounts that are not (fully?) indexed, similarly to residents of Canada and Australia - and they're generally grumpy about that.
• NZ will reduce amounts of NZ Super paid to a NZ resident by the amount received from foreign state pensions. Couples are, I believe, treated as a single unit (in the social welfare system, not the tax one). This can create perverse outcomes where, for example, a couple comprises a NZer with full pension entitlement and an immigrant with no NZ entitlement but a state pension from somewhere else. The first individual's NZ state pension is reduced by the foreign pension of their spouse. There's some pressure to resolve this, especially since the NZ eligibility period recently increased from 10 to 20 years, but I don't know if it ever was.

I don't know any IFAs there, but can refer a tax adviser on request.

Greg

[Snowbadger]

Cheers Greg,
Sums up my interpretation of a very complex situation that leaves me well out of my depth in giving anything but fundamental advice ( time in the market, diversification, index trackers etc ). The problem at this early stage is that I think NZ IFAs are still in the pre retail review commission stage so not likely to want to take on the complex problems of a couple with at least twelve pensions between two countries.

Big thanks for your input. After probably two decades of fool, it is still the first call for help.

SB

[servodude]

He probably needs to decide if domicile for the purposes of IHT matters to him; and to what ends he might be prepared to adjust his situation accordingly.
A decent IFA should be familiar with the way the UK HMRC work
-sd

[Snowbadger]

I can see where you are coming from there dude but he is just beginning to think about a retirement in ten years time. I have pointed out the IHT position but he is not yet in a position to make those judgements.

Thanks, SB