Pension transfers to New Zealand: Delaying a transfer until next year could save a lot of tax, says Simon Swallow

By Simon Swallow*

With legislation now passed, a new tax option is coming for anyone looking to transfer an overseas pension to New Zealand. From 1 April 2026, individuals will be able to use the Transfer Scheme Withholding Tax (TSWT) - a flat 28% tax withheld and paid by the receiving KiwiSaver or super fund on eligible transfers.

This change gives people more control and certainty, but it also creates a decision point: Should you transfer now under current rules, or wait until TSWT takes effect?

We ran scenario modelling across different income levels and years spent in New Zealand to help unpack that question.

What we compared

We modelled a $100,000 overseas pension transfer and calculated the (Dis)advantage of waiting — the tax difference between transferring now (under current rules) and waiting to transfer under TSWT after 1 April 2026.

This was done using:

• The schedule method, which calculates taxable amounts based on years spent in New Zealand,
• A range of incomes from $25,000 to $200,000,
• Residency durations from 5 to 30 years.

Sample results: (Dis)advantage of waiting

A negative number means tax is lower if you transfer now. A positive number means it’s lower if you wait for TSWT.

What the patterns show

1. Lower-income earners tend to do better under the current rules, especially if they’ve been in NZ for under 15 years. The schedule method sharply limits how much of the transfer is taxable early on.
2. Middle-income earners have a crossover point — typically between 15 and 20 years in NZ — where waiting for TSWT starts to make financial sense.
3. Higher-income earners benefit the most by waiting. The flat 28% tax under TSWT is significantly lower than their marginal tax rate, especially once their full transfer becomes taxable.

So, Should You Wait for 2026?

That depends on:

• Your income — the higher it is, the more likely TSWT will benefit you.
• How long you’ve lived in NZ — longer residency makes more of your transfer taxable under the schedule method, which boosts the case for TSWT.
• How soon you want to move your pension — waiting means delaying until at least April 2026.

It’s important to remember: TSWT is optional. If you wait and later decide it doesn’t work for you, you can still pay tax under the existing rules and methods.

Final word

The new TSWT option, arriving in April 2026, gives New Zealanders more flexibility and certainty when transferring overseas pensions - especially large UK balances. But it also adds complexity.

These modelled results are based solely on the schedule method and a flat $100,000 transfer. They do not consider whether you might be better off using the formula method, nor do they reflect how the extra income from a transfer could affect things like:

• Working for Families entitlements,
• Other income-tested government benefits,
• Or your wider tax situation for the year.

That’s why expert advice is essential. With new rules approaching and choices to weigh, now is the time to get clear on your options. By planning ahead, you’ll be better positioned to maximise your pension and minimise your tax - whether you transfer now or after April 2026.

Simon Swallow is a director of Charter Square. You can contact him here.