January 2026
By Jean Strock, Saturn Financial Adviser
If you are thinking of transferring your UK pension to a New Zealand Recognised Overseas Pension Scheme (ROPS) but have been put off by the potential size of your tax bill, help may be at hand.
Currently if you transfer your UK pension benefits within four years of becoming a New Zealand resident, i.e. while in your ‘transition period,’ you do not need to pay tax on the lump sum transferred.
If you transfer your pension after your four- year transition period ends, the transfer is subject to New Zealand tax, usually calculated using the schedule below.
As each year goes by the tax goes up, and after 25 years the whole transfer value will be included in your income for the tax year and taxed at your marginal tax rate, which could be as high as 39%.
Bear in mind that a large lump sum could push your income for the tax year over $180,000 meaning any amount over that threshold will be taxed at 39%. Furthermore, you can’t fund the tax liability from your transferred benefits. You need to fund the tax liability through other means.
Changes from 1 April 2026
New Zealand has passed the 2024 Taxation (Emergency Response & Contingency Planning) Bill which introduces more flexibility to the tax regime.
From 1 April 2026, you can opt to pay the new Transfer Scheme Withholding Tax (TSWT), charged at a flat 28%. If you choose this new ‘scheme pays’ option, your chosen ROPS deducts the TSWT when your funds arrive in New Zealand and pays it to the IRD on your behalf. Under this new option, you potentially pay less tax than under the current rules and the tax is deducted from your UK pension transfer meaning you don’t need to fund the tax by other means.
You need to calculate the Assessable Withdrawal Amount (i.e. the taxable amount) as per the schedule below, and advise your chosen ROPS within ten days of your funds arriving in the scheme. You may need help from a tax adviser to make the calculation.
If you do not advise the ROPS of the Assessable Withdrawal Amount in the required time, you will revert to the old method, paying the tax yourself at your marginal rate.
More information about the tax on UK pensions can be found at this link.
Pension transfers can be a complex business, particularly for those with Defined Benefit Schemes. If you are unsure about transferring your UK pension to New Zealand, we recommend you take specialist advice on the transfer as well as tax advice, and can we recommend suitable advisers to assist you.
Saturn Invest New Zealand Limited (sister company of Saturn Advice) operates the Portfolio Superannuation Scheme (PSS), a Recognised Overseas Pension Scheme. For a no obligation discussion about your UK pension, please contact saturninvest.co.nz/contact-us/
Disclaimer
The information provided is general in nature and should not be considered as tax advice or personalised financial advice. Before making any financial decisions, you should seek professional guidance and obtain specific tax advice where appropriate. The information is believed to be accurate at the time of publication but may change without notice.