Alan and the Pensive Pension

When I lived in England, I worked for the Royal Society of Chemistry. Towards the end of my time with them, they decided to implement a pension scheme for their employees. A small fraction of our pay went into a fund, and that payment was matched with an equivalent amount from the Society itself. It was the usual sort of arrangement for that kind of thing. I was only in the scheme for about two years, and then I left the job and emigrated to New Zealand. One of the things the Society gave me when I left them was a piece of paper informing me of the pension amount that I was eligible to claim when I reached the magic age of 65. I filed the paper away and forgot all about it. I found it hard to imagine that I would ever be old enough to collect the money and, of course, the amount owed to me was extraordinarily small because I hadn't been in the scheme for very long.

Time passed, as it has a habit of doing, and eventually, rather to my surprise, I actually reached the magic age of retirement. I claimed my statutory pension from the New Zealand government and settled down to enjoy the passing of the days. I didn't bother doing anything about the small Royal Society pension. It all seemed like far too much trouble for too little return, and besides, they were a long way away. Out of sight, out of mind.

But this is the twenty-first century. You can run, but you can't hide. They'll track you down all the way to the edge of the world and beyond. And so, one day, rather to my surprise, an email slithered into my inbox from the consultancy company that was administering The Royal Society of Chemistry pension scheme.

"The tracing agency we employ has suggested that you might be the Alan Robson who worked for the Royal Society from 1972 to 1980." said the email. "If you can confirm that, we would like to pay you some money, though not very much."

"Yes," I said, somewhat reluctantly, "that's me."

"Oh good," said the email. "All you have to do now is prove that to my satisfaction and then you can sit back and let the money trickle in."

"How do I do that?" I asked.

"Let's start with your full postal address, your date of birth, and your British National Insurance number," said the email. "If these last two bits of information match what we have on file, we'll move on to the next step."

"OK," I said, "here's the info." I felt rather proud of myself. It isn't everybody who can remember their National Insurance number thirty five years after they last used it in anger. Fortunately I had it written down on a piece of paper – the same piece of paper, as it happens, that the Royal Society had given me when I left their employment. Even more fortunately, that piece of paper had survived the move across the world and several moves between cities here in New Zealand. Not all my pieces of paper have been that lucky.

"Looks good," said the email. "All I need now is your birth certificate."

"Sorry," I said. "I'm not willing to trust my birth certificate to the postal services. There's a lot of water between here and the UK. Anything could happen to it. How about I let you have a notarised copy of it instead?"

The email grumbled a bit, but eventually agreed that would probably do. "Oh, by the way," it added, "the pension will be taxed at source in the UK before you receive it."

"But it will be taxed here by the New Zealand IRD when I declare it," I said. "Does that mean I get taxed twice on the same income?"

"Yes," said the email smugly.

"That seems a bit unfair," I said. "There won't be anything left after I've paid two lots of tax on it."

"Sorry," said the email. "I don't make the rules, I just obey them."

I contacted the New Zealand tax department (the IRD) and asked what I could do about the double taxation.

"Today's your lucky day," said the IRD. "As it happens, we have an agreement with the UK tax authorities. All you have to do is fill in the hugely complicated form I've just posted to you. Send a copy to me and another copy to the UK tax people and in the fullness of time they'll stop taxing you in the UK and leave it all up to us. Oh, and by the way, since you are in receipt of untaxed income which you have to declare here in New Zealand, you are deemed to be self-employed and you will have to fill in an IR3 form and pay provisional tax on your estimated income for the next twelve months."

It all sounded horribly complicated and I began to regret having admitted to the email that I was the Alan Robson it was looking for. Perhaps I could go back to square one and do a Jedi thing that would convince the email that really I was not the Alan Robson it was looking for. I began to consider the benefits of an offshore truss. Unfortunately I didn't know how to spell Mossack Fonseca so clearly the truss would not be able to provide any support...

I filled in the horribly complicated form. Every time it asked me a question I didn't understand I wrote Not Applicable, and crossed my fingers. Then I signed it, dated it, and photocopied it. One copy went to the IRD and one copy to the UK tax people. And then absolutely nothing happened except that every month money from the Royal Society started to appear in my bank account. Furthermore, I also got a monthly snail mail which contained a printed form that told me how much money I was getting and how much tax the UK government had taken away from it.

Then, quite out of the blue, when I'd almost forgotten about the very complicated form, I got a letter from the UK tax authorities informing me that I no longer had to pay tax on my pension and a few days after that, all the tax that I'd paid so far was returned to me in a lump sum.

Now, all that remained to be sorted out was the evil IR3 form that I would have to fill in when the end of the tax year arrived. I'd filled in an IR3 form once before, about twenty years ago and it had been a rather frightening experience. My imaginative answer to Question 11 had caused the IRD's powerful Babbage Mark II  mainframe computer to spring a sprocket and strip all the gears in its primary register. The resultant chaos is still spoken of in hushed tones by the IRD staff. Clearly I was going to need professional help with my IR3 this time around.

Havelock North has everything a retired person could possibly need and one of those things is a tax accountant. I rang the tax accountant and asked for help. "Yes, I can easily do that for you," said a nice lady and I made an appointment to see her.

She listened carefully to my explanation of the situation and examined the figures I provided to her. "Well, that all seems very straightforward," she said. Clearly Question 11 held no fears for her, even though it had grown more complex over the years and now had four parts to it. I felt very reassured.

The next day I got an email from the IRD informing me that the nice lady had been registered as my tax accountant. The day after that she emailed me a summary of my IR3 tax return and and said that if I agreed with the figures, could I come in and sign the form. Since the figures promised me a tax refund of $1200 I couldn't see anything at all to argue with, so I immediately went in to her office and signed the form.

"Apart from the refund," she said, "the other good news is that your Royal Society pension is so extraordinarily tiny that the IRD find it to be beneath contempt, and so you do not have to pay provisional tax."

"That's wonderful," I said. "I'd been quite worried about that."

"I'll file your tax return straight away," she said and presumably she did exactly that because two days later the IRD deposited $1200 into my bank account.

I know what I'm going to be doing at the end of every tax year from now on.