Taxation of Pensions Bill

Written evidence submitted by Britannia Financial Services Ltd, Auckland, New Zealand (TP 17)


1. This submission is made on behalf of Britannia Financial Services Ltd. We are a medium sized financial services company based in Auckland, New Zealand. We have offered financial advice to UK expatriate community for the last 20 years having expertise in the areas of retirement planning and wealth creation with particular emphasis on the transfer of pension accounts from United Kingdom registered pension schemes. Transferred funds are invested on an ethical basis and combined with a planned retirement savings programme leading to enhanced security in retirement.


2. Our submission wishes to bring to your attention concerns regarding the blanket prohibition alluded to in the Taxation of Pension Bill regarding access for transfer purposes for certain unfunded state sector defined benefit registered pension schemes - and the impact this blanket ban will have on the future financial well-being of returning New Zealanders and UK expatriates emigrating to this country who have previously contributed to these schemes.

3. We have read through the explanatory notes in relation to the Bill and are alerted to the fact that a blanket ban on transfers from unfunded state sector schemes seems to be an inevitable consequence.

4. The initial HM Treasury consultation document entitled Freedom and choice in pensions" raised the possibility that the government might legislate to remove the right to transfer from defined benefit schemes to defined contribution schemes "except in exceptional circumstances".

5. The follow up document from HM Treasury entitled "Freedom and choice in pensions - government response to the consultation" completely omitted any reference to "exceptional circumstances" concept in allowing some transfers to be made from defined benefit schemes.

6. During the initial consultation period on the initial paper entitled "Freedom and choice in pensions" we made the point strongly that denying the right to a cash equivalent transfer value from an unfunded state sector defined benefit scheme for former contributors, either returning to New Zealand after spending some years working in the United Kingdom, or to persons emigrating with their families to this country, would create a two tier pension situation for these persons. Some returning New Zealanders or emigrants having the right to transfer pension rights from fully funded defined benefit and/or defined contribution schemes as opposed those unfortunate enough to have contributed to unfunded state sector defined benefit schemes.

7. We made the further point that New Zealand operates a tax incentive scheme whereby pension holders returning home - or persons immigrating to this country holding offshore pension accounts have a four year window of opportunity to transfer their pension funds to a qualifying New Zealand scheme or suffer quite severe tax penalties. If transfers from certain defined benefit schemes are prohibited these contributors will be severely disadvantaged in later life when their pensions can be drawn down from the UK scheme.

8. Our submission made reference to an analysis conducted by industry sources indicated a very small percentage of contributors exiting unfunded defined benefit schemes to either return home or emigrate compared to total contributions to these schemes (less than 0.3%). This figure hardly likely to be a drain on the Exchequer.

9. Our submission suggested that the undefined "exceptional circumstances" concept present in the original consultation document should be defined in regulations and include the provision for an ex member of a defined benefit scheme to be granted an exemption from any transfer ban on the basis that they had moved permanently abroad with no intention of returning the UK to live and/or retire. We suggested further that any application under this exemption if granted must be accompanied by firm evidence of a permanent move abroad.

10. An exemption from any ban on the grounds of permanent emigration would simply take pension transfer rules back to the situation that existed before "A Day" established the QROPS regime. Previous regulations required the applicant to show firm evidence of permanent residency and employment abroad.


11. We have concerns that a blanket ban on transfers from certain defined benefit schemes may be legislated for in the final version of the Taxation of Pension Bill.

12. The original consultation paper issued by HM Treasury floated the idea that some transfers would be allowed from defined benefit schemes in "exceptional circumstances".

13. The follow up document issued by HM Treasury made no further mention of the "exceptional circumstances" concept.

14. A blanket ban on the transfer of defined benefit schemes will mean the creation of a two tiered pension situation with some emigrants and/or returning New Zealanders having rights to transfer their pension and some not.

15. New Zealand operates a system of tax penalties for persons holding overseas domiciled pension accounts which will penalise more heavily those members of defined benefit schemes unable to transfer their pension to New Zealand through no fault of their own.

16. A secure system could easily be established to ensure persons applying for a transfer under permanent emigration rules were genuine.

17. An exemption from any ban on transfers from defined benefit schemes provided sufficient evidence was provided showing permanent residence abroad would be a reversion back to regulations applying before "A Day" and the creation of the QROPS entity.

Person responsible for this submission:

D.T.Milner, CFP, CLU, GradDipBusStud (Massey), AFA

Director, Britannia Financial Services Ltd, Auckland, New Zealand

November 2014

Prepared 20th November 2014