UK Pension Transfers to New Zealand: The New “Scheme Pays” Tax Rules
Our guide explains what the Transfer Scheme Withholding Tax means, who it suits, and the traps to avoid.
Updated 6 August 2026
Summary
Our guide covers:
Know This First: This change is about how the tax is paid, not whether you should transfer. Paying less tax is not, on its own, a reason to move a UK pension. Some UK schemes carry valuable guarantees you would give up by transferring, and a transfer usually cannot be reversed. Weigh the transfer decision separately from the tax question.
Important: This guide is general information only and is not financial or tax advice. Tax rules for foreign pension transfers are complex and subject to change, and the right approach depends on your personal circumstances. Consider seeking advice from a qualified financial and tax adviser before transferring a UK pension.
Summary
- Since 1 April 2026, anyone transferring a UK pension to a New Zealand superannuation scheme has had a new way to deal with the tax. It is called “Scheme Pays”, and it lets the New Zealand scheme receiving your pension pay the tax for you, directly from the transferred funds, at a flat rate. For people who were previously put off transferring because they could not fund the tax bill, it removes a real barrier.
- This guide explains how Scheme Pays works, how it compares with the old approach, who it suits, and the traps to watch for. It is general information only and is not financial or tax advice. Pension transfers are complex and the right answer depends on your own circumstances, so professional advice is strongly recommended before you act. We suggest reading our UK Pension Transfers (QROPS) to NZ guide which explains your options.
Our guide covers:
- What Changed on 1 April 2026
- Scheme Pays or Individual Pays: Which is Better?
- Should You Transfer Your UK Pension At All?
- Frequently Asked Questions
Know This First: This change is about how the tax is paid, not whether you should transfer. Paying less tax is not, on its own, a reason to move a UK pension. Some UK schemes carry valuable guarantees you would give up by transferring, and a transfer usually cannot be reversed. Weigh the transfer decision separately from the tax question.
Important: This guide is general information only and is not financial or tax advice. Tax rules for foreign pension transfers are complex and subject to change, and the right approach depends on your personal circumstances. Consider seeking advice from a qualified financial and tax adviser before transferring a UK pension.
What Changed on 1 April 2026
Until recently, the only way to handle the tax on a UK pension transfer was what is now called “Individual Pays”. You declared the taxable portion of the transfer in your own tax return and paid tax on it at your marginal rate, which can be as high as 39%, from your own money.
From 1 April 2026, a new option sits alongside it. Under “Scheme Pays”, the New Zealand scheme that receives your transfer can deduct the tax and pay it to Inland Revenue on your behalf, taken straight from the funds you transferred. The tax is charged at a flat 28%, called the Transfer Scheme Withholding Tax, or TSWT. That 28% rate matches the top Prescribed Investor Rate (PIR) used for managed funds.
The change was made through the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Act. It applies only to transfers into a New Zealand superannuation scheme. Lump sum withdrawals you take in cash, and ordinary pension payments from a UK scheme, are still taxed at your marginal rate.
From 1 April 2026, a new option sits alongside it. Under “Scheme Pays”, the New Zealand scheme that receives your transfer can deduct the tax and pay it to Inland Revenue on your behalf, taken straight from the funds you transferred. The tax is charged at a flat 28%, called the Transfer Scheme Withholding Tax, or TSWT. That 28% rate matches the top Prescribed Investor Rate (PIR) used for managed funds.
The change was made through the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Act. It applies only to transfers into a New Zealand superannuation scheme. Lump sum withdrawals you take in cash, and ordinary pension payments from a UK scheme, are still taxed at your marginal rate.
Understanding the Taxable Portion: The Assessable Withdrawal Amount
Tax is not charged on the whole transfer. It is charged on the taxable portion, which Inland Revenue calls the Assessable Withdrawal Amount, or AWA. Depending on your circumstances, the AWA can be anywhere from nil to the full value of the transfer. Two things drive it.
Know This: Do not assume the whole transfer is taxable, and do not assume it is all tax-free. The taxable amount has to be calculated. Tax residency is not always straightforward either: the UK and New Zealand use different residency tests, and it is possible to be treated as resident in both countries at the same time.
Reminder: Pension transfers are complex and the right answer depends on your own circumstances, so professional advice is strongly recommended before you act. We suggest reading our UK Pension Transfers (QROPS) to NZ guide which explains your options.
- The four-year exemption period. If you have recently become a New Zealand tax resident, you generally have a four-year window in which a UK pension transfer can be made tax-free. The window starts when you become a tax resident. Transfer within it and the AWA can be nil.
- The calculation method, once the window has passed. Outside the exemption period, the AWA is worked out using one of two methods: the schedule method or the formula method. You can generally use whichever gives the lower result, but not always. People transferring a defined benefit scheme, such as a UK Universities or Local Government pension, usually have to use the schedule method. The difference between the two methods can run to tens of thousands of dollars, so this is worth getting right.
Know This: Do not assume the whole transfer is taxable, and do not assume it is all tax-free. The taxable amount has to be calculated. Tax residency is not always straightforward either: the UK and New Zealand use different residency tests, and it is possible to be treated as resident in both countries at the same time.
Reminder: Pension transfers are complex and the right answer depends on your own circumstances, so professional advice is strongly recommended before you act. We suggest reading our UK Pension Transfers (QROPS) to NZ guide which explains your options.
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Expert UK Pension Transfer Guidance with QROPSNZ.com
Important: We aim to inform our readers of an independent service offering a clear path to UK pension transfers, and have selected QROPSNZ as our trusted partner for UK pension transfer insights. Know This:
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Contact Details:
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Scheme Pays or Individual Pays: Which is Better?
Neither option is automatically better. It comes down to the rate you would otherwise pay and your wider tax position.
Scheme Pays tends to suit you if:
Individual Pays may suit you better if:
Warning: The 28% under Scheme Pays is a final tax. If your marginal rate on the transfer turns out to be below 28%, you cannot claim the difference back. There is no refund. If you are likely to sit below 28%, Individual Pays is usually the better choice, so work this out before you commit.
Scheme Pays tends to suit you if:
- Your marginal tax rate on the transfer would be above 28%. Because the AWA is added on top of your other income, a large transfer can be taxed at 33% or 39% under Individual Pays even if your salary alone sits lower. In broad terms this affects people earning more than $53,500, and anyone transferring a large sum.
- You are under 55 and cannot yet access the pension to fund a separate tax bill.
- You want to avoid a cash tax bill and keep things simple.
- You receive Working for Families, have a student loan, or get other income-tested support.
- You are a salary or wage earner who does not usually file a tax return.
Individual Pays may suit you better if:
- Your marginal rate on the transfer would be below 28%, because under Scheme Pays the 28% is a final tax.
- You have losses or deductions that would reduce the taxable amount under the normal rules.
- You would prefer the amount dealt with through your ordinary tax return.
Warning: The 28% under Scheme Pays is a final tax. If your marginal rate on the transfer turns out to be below 28%, you cannot claim the difference back. There is no refund. If you are likely to sit below 28%, Individual Pays is usually the better choice, so work this out before you commit.
A social policy point worth knowing
Important: The ten-day trap
Warning: Miss the 10-working-day deadline and you lose the Scheme Pays option for that transfer. You revert to Individual Pays, which means paying the tax yourself, at your marginal rate of up to 39%, from your own funds. Have all the evidence you need to calculate your AWA the day your money arrives, not after.
- Under Individual Pays, the transfer goes through your tax return and counts as income. That can reduce entitlements such as Working for Families, or affect student loan repayments.
- Under Scheme Pays, the amount is handled at source and does not appear in your tax return, so it does not count as income for these purposes.
- For families receiving income-tested support, that can be a meaningful difference.
Important: The ten-day trap
- The biggest practical risk with Scheme Pays is time. Once your transfer lands in the New Zealand scheme, you have only 10 working days to tell the scheme your AWA so it can deduct the right amount of tax.
- Working out the AWA is not simple. It usually means pulling together your tax residency dates, historic pension values, and a record of contributions and withdrawals. That work needs to be done before the transfer arrives, so you are ready to give the scheme the figure inside the window.
Warning: Miss the 10-working-day deadline and you lose the Scheme Pays option for that transfer. You revert to Individual Pays, which means paying the tax yourself, at your marginal rate of up to 39%, from your own funds. Have all the evidence you need to calculate your AWA the day your money arrives, not after.
Should You Transfer Your UK Pension At All?
Our view is simple - Scheme Pays makes the tax easier to handle. It does not answer the more important question of whether moving your UK pension is the right call.
Transferring is a major decision, with trade-offs that have nothing to do with the new tax rules. Before transferring, consider the following.
Our View:
Transferring is a major decision, with trade-offs that have nothing to do with the new tax rules. Before transferring, consider the following.
- Guarantees you may give up. Some UK schemes, particularly defined benefit pensions, include valuable features such as a guaranteed income for life, spouse or dependant pensions, inflation-linked increases, or built-in insurance. You may lose these by transferring.
- It is usually one-way. Once your pension is in New Zealand, you generally cannot move it back to the same UK scheme on the same terms.
- A possible UK tax charge. The UK has its own Overseas Transfer Charge, which can be up to 25% on certain transfers. A transfer to a New Zealand scheme is often outside the charge while you live here, but it can apply if your circumstances change.
- Currency and timing. Transferring converts your pension to New Zealand dollars, which carries exchange rate risk, and the value can move between deciding and completing.
Our View:
- For most people who have decided to transfer and whose marginal rate sits above 28%, Scheme Pays will be the simpler and often cheaper option, and it removes the old problem of needing cash on hand to pay the tax. It is not automatic, though. If your rate is below 28% you may pay more than you need to, and the tight 10-day window means the planning has to happen before the transfer arrives. Treat it as a process to prepare for, not a box to tick afterwards.
- We suggest reading our UK Pension Transfers (QROPS) to NZ guide which explains your options.
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MoneyHub Founder Christopher Walsh Shares His View:
"Scheme Pays is a genuine improvement, and for higher earners with large transfers it can save real money. But a lower tax bill is the wrong reason to move a pension on its own. The first question is always whether transferring makes sense at all, once you account for what you might be giving up. Get the transfer decision right first, then deal with the tax, and take advice before the funds move, not after". |
Christopher Walsh
MoneyHub Founder |
Frequently Asked Questions
What is “Scheme Pays”?
It is an option, available from 1 April 2026, that lets the New Zealand scheme receiving your UK pension pay the tax on the transfer for you, directly from the transferred funds, rather than you funding it yourself.
What rate applies?
A flat 28%, called the Transfer Scheme Withholding Tax (TSWT), charged on the taxable portion of the transfer, the Assessable Withdrawal Amount.
How is it different from “Individual Pays”?
Under Individual Pays, you declare the transfer in your own tax return and pay tax at your marginal rate, up to 39%, from your own money. Scheme Pays uses a flat 28% and the tax comes out of the transferred funds.
Do I need to file a tax return under Scheme Pays?
No. The tax is handled at source, so the transfer does not need to go through an IR3 return.
Will the transfer affect Working for Families or other entitlements?
Under Scheme Pays, no. Because the amount does not appear in your tax return, it does not count as income for income-tested support such as Working for Families or student loan repayments. Under Individual Pays it can.
Is Scheme Pays always the best option?
No. If your marginal rate on the transfer is below 28%, or you have losses or deductions that would reduce the taxable amount, Individual Pays may leave you better off. Remember the 28% is a final tax and cannot be refunded.
What is the Assessable Withdrawal Amount (AWA)?
It is the taxable portion of your transfer. It can range from nil to the full amount, depending on your tax residency and how long you have been here, and it is calculated using the schedule method or the formula method.
How long do I have to act?
You have 10 working days from when the transfer reaches the New Zealand scheme to provide your AWA. Miss it and you revert to Individual Pays.
Why is professional advice important?
The AWA has to be calculated correctly and provided within a tight window, the choice between methods can change the tax significantly, and the decision to transfer at all involves trade-offs beyond tax. An adviser can help you choose the right method, meet the deadline, and avoid paying more than you need to.
Does this change whether I should transfer my pension?
No. Scheme Pays only changes how the tax is paid. Whether to transfer is a separate decision that depends on the guarantees in your UK scheme, the permanence of the move, possible UK charges, and currency risk.
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Expert UK Pension Transfer Guidance with QROPSNZ.com
Important: We aim to inform our readers of an independent service offering a clear path to UK pension transfers, and have selected QROPSNZ as our trusted partner for UK pension transfer insights. Know This:
|
Contact Details:
|
Related Resources: NZ Super & Pension Transfers
