The number of immigrants from the United Kingdom who have chosen to transfer their UK pension fund assets to New Zealand has increased, but Perpetual Trust's UK pension fund specialist says making the right decision can be complicated.
United Kingdom residents living in New Zealand were urged to give "proper thought" before transferring their pension fund assets to New Zealand, Perpetual Trust's UK pension fund specialist Mark Hattersley said on Wednesday night.
Speaking at a presentation to UK immigrants in Queenstown , Mr Hattersley said the number choosing to transfer their pension fund assets to New Zealand had increased significantly in recent years.
In the financial year ended March 31, 1998, there were 5210 official immigrants to New Zealand.
In the past four years, the number of UK immigrants coming to New Zealand averaged 13,187 a year.
While there were some good reasons to transfer a UK pension fund, making the right decision could be complicated, Mr Hattersley said.
"All too often, people decide to transfer their benefits to New Zealand without proper thought to the implications of their actions.
"Anyone who buys a used car without at least kicking the tyres is thought a fool.
"Pension funds can be the biggest asset you accrue, so it is imperative that you get a mechanic to check the wheels and look under the bonnet," he said.
Providing for retirement was often not given the consideration it deserved, which was "a big mistake" given changes in demographics.
A century ago, retirement typically only lasted 10 years, but there had been a "massive increase" in life expectancy since then, Mr Hattersley said.
The number of people living in the UK aged 85 and over is expected to rise by 66% in the next 20 years, yet the population is only set to increase by 10%.
It was forecast those needing care would increase by 53% and those with high-level needs by 57%.
The New Zealand Government had similar predictions, Mr Hattersley said.
"Today, we should plan for 20 to 30 years of retirement and make suitable financial provision to cover normal expenditure and medical and care costs.
" So making the right decision about your UK pension is vital."
Mr Hattersley said there were many reasons why UK migrants might transfer their pension assets, including the simplicity of having funds in their adopted country.
However, the decision of whether or not to transfer a UK pension was more difficult in cases where the benefits under consideration were an occupational pension which offered defined benefits at retirement - also known as a final salary scheme - and private arrangements invested in a profits investment fund, or where the policy contained a guaranteed annuity rate.
He said it was imperative for people to get professional advice.
A detailed evaluation was needed before making the decision to transfer assets.
"The wrong decision can be very costly.
"In the case of a defined benefit scheme, if the decision is taken to accept the transfer value, the individual gives up the guarantee of an increasing monthly pension at retirement.
"A financial adviser who is well versed in UK pension scheme rules and regulations will be able to provide a comprehensive report comparing the benefits secured under the scheme and those that might emerge from transferring to a superannuation scheme.
"This will also marry up the investor's financial requirements, aspirations for their retirement, attitude to investment risk and time horizon and whether . . . accepting the transfer value will result in a more appropriate retirement income stream."
