If part of a pension within a QROPS that originally derived from a UK pension is transferred to an ex-spouse as part of a separation, it will be classed as an unauthorised payment unless it is done in accordance with UK pension sharing rules. An unauthorised payment will result in a charge being levied on the Member of up to 55% of the value of the transfer to the ex-spouse. Such charges are not prevented by the UK/New Zealand Double Taxation Agreement as it is not considered to be a tax and is therefore outside the ambit of such an agreement.
The pension sharing regulations in the UK were extended in 2006 to cover overseas pension schemes by The Pension Schemes (Application of UK Provisions of Relevant Non-UK Schemes) Regulations – SI 2006/07).
This regulation applies to the division of a fund within a QROPS on the dissolution of a marriage, which includes a civil partnership, but not a de-facto partnership.
The requirements for a pension split to be an authorised payment under the UK regulations are as follows:
Under New Zealand law, pension sharing can be achieved with just a Relationship Property Agreement validly executed under the Property (Relationships) Act 1976. This does not require the marriage to be dissolved, and it does not require the courts to be involved. However, the UK regulations require the pension sharing to have been both by order of a court and in relation to proceedings that will lead to the dissolution of the marriage or civil union.
An example agreement to be put to the Courts to be used as part of the application to the Courts for ratification of a Relationship Property Agreement is attached. This needs to be considered by a lawyer.
A checklist of the requirements is as follows:
