Game-changer for your clients: UK pension transfers just got easier

New 'scheme pays' option removes major barrier – and Garrison Bridge is making it even simpler for advisers.

The challenge you've been facing

For years, advising clients on UK pension transfers has been complicated by one major obstacle: cash flow.

Unless your client qualified as a transitional resident (a new or returning NZ tax resident with a temporary 48-month exemption from tax on foreign income), the Transfer Scheme Withholding Tax (TSWT) had to be paid upfront, out of pocket—often making transfers financially prohibitive, even when they made strategic sense.

This barrier has likely prevented many of your clients from consolidating their retirement savings and simplifying their financial affairs.

Budget 2025: The 'scheme pays' solution

Effective 1 April 2026, a new option fundamentally changes the landscape for pension transfers.

What is 'scheme pays'?

Under this approach, the New Zealand receiving pension scheme can deduct the tax due and pay it directly to Inland Revenue from the transferred pension funds themselves—eliminating the need for clients to fund the tax separately.

Key benefits for your clients:

• No upfront cash required- tax is paid from the transfer proceeds.
• Flat 28% tax rate when using scheme pays, versus potentially 39% at marginal rates under the traditional approach.
• Simplified cash flow–clients don't need to liquidate other assets to fund the tax.
• More transfers become viable– removes the primary barrier that's been stopping clients from consolidating UK pensions.

Important parameters:

• Applies to transfers to NZ schemes (not direct lump sum withdrawals to individuals).
• Available for UK pensions and potentially others, depending on the receiving scheme's capabilities.
• Only relevant for clients who've been NZ tax residents for more than four years.

How the tax calculation works

Understanding the mechanics helps you advise clients effectively:

Step 1: Determine tax liability status

Is your client outside their transitional resident period? Transitional residents (new or returning NZ tax residents with a temporary 48-month exemption from tax on foreign income) are generally exempt from TSWT on pension transfers.

If your client is outside this 48-month window, they will likely owe TSWT on the transfer.

Step 2: Calculate the Assessable Withdrawal Amount (AWA)

The AWA is based on the time between when your client became a NZ tax resident and when they transfer their pension. The longer they've been resident, the larger the assessable amount.

This calculation is complex and critical - errors can result in significant tax implications for your clients.

Step 3: Apply the tax rate

• Scheme pays option: Flat 28% TSWT on the AWA, deducted from transfer proceeds
• Individual pays option: AWA included in tax return, taxed at marginal rate (up to 39%)

Choosing the right approach - your recommendation will depend on:

• Client's marginal tax rate
• Their cash flow situation
• Overall retirement strategy
• Other income sources

Why Garrison Bridge is your strategic partner

Lifetime Asset Management manages the Garrison Bridge Superannuation Scheme, a recognised Qualifying Recognised Overseas Pension Scheme (QROPS) in both New Zealand and Australia.

• Making the scheme pays calculations manageable. The calculation is complex; we want to help.
• The tax calculation: Under delegation from your client we will prepare the tax calculation, advise your client and on their approval pay the tax in accordance with the scheme pays rules. We provide this service for advisers and your clients at no cost.
• Scheme pays enabled: We fully support the new scheme pays option, making us ready for your clients from 1 April 2026.
• Adviser-friendly process: We work collaboratively with advisers, providing clear documentation and support throughout the transfer process.
• Dual recognition: As a QROPS recognised in both NZ and Australia, we offer flexibility for clients with trans-Tasman connections.

The value proposition for your practice: with scheme pays + Garrison Bridge:

• We can handle AWA calculations – reducing your technical burden and risk.
• No upfront client cash required – more transfers become viable.
• Potential 11% tax saving (28% vs 39%) for high-income clients.
• Streamlined process – we manage the mechanics while you focus on strategy.
  
  
  

Get in touch

Get in touch with Chelsea Devlin if you would like to learn more about Garrison Bridge.