MR No. 2014 – 047
18 December 2014
The Financial Markets Authority (FMA) is warning people to be cautious of potentially misleading and deceptive advertising about transferring United Kingdom pension scheme entitlements to New Zealand.
The FMA has been monitoring promotional materials and advertisements that encourage people to transfer their UK pension scheme entitlements, and has requested that certain materials be removed from publication. Some of these materials appear designed to alarm people about changes to the tax treatment of their UK pension scheme entitlements in New Zealand and the accessibility of their entitlements due to proposed changes to UK legislation in April 2015.
“We are concerned that people are feeling press-ganged into transferring their pension scheme entitlements from the UK and being put under pressure to act now,” said Elaine Campbell, FMA's Director of Compliance.
“For people thinking about transferring their UK pension scheme entitlements, those savings are likely to be one of the most substantial assets accumulated over their working life. Before making a significant decision like this, it’s essential they seek professional financial advice that is personalised for their own circumstances - and also consider talking to a tax specialist,” said Ms. Campbell.
A guiding principle of Inland Revenue’s approach on taxing foreign superannuation in New Zealand states, “from a New Zealand tax perspective, the tax outcome for a person who migrates with a foreign superannuation scheme should be broadly the same irrespective of whether the person transferred their funds to a New Zealand superannuation scheme on day one, or left it with the foreign scheme provider. This reflects the principle that tax should not distort a person’s economic decision-making.”[i]
Ms. Campbell said, “We are concerned that tax issues and a misleading sense of urgency are being exploited by some providers to scare people into transferring their money, without offering a balanced view of the potential pros and cons involved.”
The FMA recommends that anybody considering transferring their UK pension scheme entitlements should seek personalised financial advice and make sure they are confident that transferring their entitlements from the UK is in their best interests.
The FMA notes that ‘old age’ state pensions provided by the UK government at retirement are not transferrable, so this warning does not apply to these pensions.
Under the Financial Markets Conduct Act 2013, financial market participants must not engage in misleading or deceptive conduct, including in statements made in advertising.
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For New Zealand based tax matters, please contact IRD