The Scheme That Pays

i-Select

February 26, 2026

Overseas Pension Transfers: New Scheme Pays Option from 1 April 2026. If you have an overseas pension — such as a UK pension — and are now living in New Zealand, you may be considering whether to transfer that pension into a New Zealand superannuation scheme.

One of the main reasons people delay transferring is the New Zealand tax that can apply to the transfer, particularly if they are no longer within the 4-year exemption period. In the past, that tax generally needed to be paid from personal funds.
From 1 April 2026, a new option known as “Scheme Pays” may make transferring more practical for some people — because the tax can potentially be funded directly from the transferred amount.

What is Scheme Pays?

When you transfer a foreign pension to New Zealand, part of that transfer may be taxable. The taxable portion is called the Assessable Withdrawal Amount (AWA).
Under the updated rules you must choose how any New Zealand tax on your AWA is paid.

You generally have three options:

Yes – Scheme Pays
i-Select withholds tax at a flat 28% rate on the AWA and pays Inland Revenue directly from the transferred funds.
No – You pay personally
You include the AWA in your personal income tax return and pay tax at your marginal rate.
Exempt
If your transfer qualifies as fully exempt (for example, under the 4-year exemption), your AWA must be $0.

Scheme Pays does not remove tax. It changes how the tax is funded.

Inland Revenue website updates

Inland Revenue has confirmed that:

From 2 March, scheme-level Overseas Pension Transfer (OPT) information will be published on its website, including:
- How schemes register for an OPT account
- How schemes file OPT returns
- How to cancel an OPT account
Customer-facing information, including guidance on:
- Foreign Superannuation
- The Scheme Pays option is expected to go live closer to 1 April.

i-Select is aligned with IRD’s updated reporting requirements and will operate under the new framework from the effective date.

Why this matters — especially if you’ve been in NZ more than four years

If you moved to New Zealand more than four years ago, you may have assumed that transferring your overseas pension was no longer attractive because tax would apply — and you would need to fund that tax personally.

Under Scheme Pays, you may now elect to have the tax deducted from the transferred amount instead. For some individuals, this removes the cashflow barrier that previously prevented a transfer. Whether a transfer makes sense depends on your personal circumstances, including:

Your New Zealand tax residency date
The method used to calculate the taxable portion
Your marginal tax rate
Your long-term retirement objectives

Important: Member responsibility

The scheme cannot calculate your taxable amount for you.

You are responsible for:

Determining your Assessable Withdrawal Amount (using either the Schedule or Formula method, as applicable);
Confirming the correct tax amount if you elect Scheme Pays;
Ensuring the information provided is accurate.

If the amount is incorrect, any shortfall, penalties or interest are payable by you directly. Independent tax advice is recommended.

Key operational timing

For transfers received from 1 April 2026:

Once funds are received and allocated to you, there will be a limited timeframe (typically 10 business days) to provide your election and tax amount.
If the required information is not received within that timeframe, Scheme Pays may not be available.
If you elect Scheme Pays, there may be a short delay before funds are fully invested while the tax amount is confirmed and withheld.

Considering a transfer?

If you previously decided not to transfer because you did not want to fund the tax from your own savings, it may be worth revisiting that decision.

Call i-Select on +64 3 308 0144
‍You can reach us through our contact page or alternatively through our email: info@i-select.co.nz.

We can explain the process, the deadlines, and what information you will need before making an election.

All writers' opinions are their own and do not constitute financial advice in any way whatsoever. i-Select strongly recommends that you perform your own independent research and/or speak with a qualified financial adviser before making any financial or tax decision.