Twelve members of the stock exhange's Smartshares KiwiSaver scheme have been told they could face a hefty tax bill if they move schemes because of changes to tax laws in the United Kingdom.
The NZX has written to members of its Smartshares KiwiSaver scheme proposing most transfer to its SuperLife KiwiSaver scheme.
It acquired the SuperLife business in January which means the company now operates two KiwiSaver schemes.
It is recommending the Smartkiwi scheme members move to the SuperLife scheme because it has a wider range of investment options, a better online service and more frequent communications.
But 12 of the approximately 1350 members have been told they will not be transferred because they have previously moved UK pension money into their KiwiSaver scheme and could face a tax bill of 40 per cent of the transferred amount and a further 15 per cent of the balance in a surcharge.
"Recent UK law changes mean that if we transfer Smartshares KiwiSaver scheme members who have transferred money from a UK pension scheme, these members could be liable for an unauthorised payment charge (40 per cent of the transferred balance) and an unauthorised payment surcharge (a further 15 per cent of the transferred balance)," NZX head of funds management Aaron Jenkins wrote.
The NZX said it would keep the SmartKiwi scheme open to accommodate the members and any higher costs of running it with fewer members would be met by the NZX.
The 12 members have been advised to get UK tax advice before transferring to any other KiwiSaver scheme and have been told they are not alone in facing the issue.
"Smartshares has raised its concerns in respect of the recent UK law changes with HM Revenue & Customs (in particular, that people that have transferred money from a UK pension scheme into a KiwiSaver scheme may be 'trapped' with their current KiwiSaver scheme provider - this is an issue for all KiwiSaver schemes, not just the Smartshares KiwiSaver scheme).
"We have asked HM Revenue & Customs to allow you to transfer to another KiwiSaver scheme without unauthorised payment charges."
The NZX said it had yet to receive a response from the UK tax department.
The problem stems from a UK tax department decision made in April to remove the KiwiSaver schemes from its list of qualifying overseas pension schemes.
This was done because of concerns about people getting access to their money before retirement.
KiwiSaver allows people to access their funds early to buy their first home and through financial hardship.
The members of the SmartKiwi scheme not affected by the UK pension issue have until October 26 to send a submission on the proposed transfer to the Financial Markets Authority which will make the final call on the transfer.
If the FMA gives approval the members will be transferred this November.