KiwiSaver transfers from Australia still a drag

Some New Zealanders trying to transfer Australian superannuation funds back to this country are still facing difficulties, one adviser says.

Trans-Tasman portability of superannuation funds has been possible since 2013. Funds can be transferred to KiwiSaver schemes.

But Jeremy Hoskin, of Super-Advice, which helps with the process, said many people were still being left frustrated.

“With more New Zealanders returning than going to Australia, this service is really ramping up,” he said. “The common thread is the absolute frustration from people who have tried unsuccessfully to gain access to their funds. There appears to be administrative roadblocks put in place to deter people from getting their money across to New Zealand.”

He said his firm had helped move about $1.5 million in super savings so far. The biggest transfer was $500,000.

The Australian fund managers in particular were reluctant to play ball, and the transfer could take a significant amount of time, he said. “They seem to lose documents a lot. I have had that happen multiple times.”

He said there was a lot of money in Australia that New Zealanders could bring back. “There is more money in Australian super funds earned by New Zealanders than in all of the KiwiSaver schemes. You can see why they don’t want to let it go.”

More “lost super” is being transferred to the Australian Tax Office, where it is harder to access it.

AN ANZ spokesperson said things had been running more smoothly for the last year. “Generally, once the member has completed the Australian forms and sent these to their provider…it only takes a few weeks to have their savings in their KiwiSaver account.”

But she said it might be easier for ANZ than some providers because it was the only one with an exemption to allow people in New Zealand to open an Australian scheme, so they could consolidate their savings in one place.

ANZ had $31 million transferred across the Tasman in the year to July 2016, up from $20 million the year before.  Since transfers began, 2659 ANZ members had transferred $63.7 million from Australia into a KiwiSaver scheme.

SuperLife shines for NZX

SuperLife’s KiwiSaver business grew 26.6% in the six months to the end of June, the NZX has revealed today.

The sharemarket operator has released its half-yearly financial results.

Total NZX revenues for the hal- year of $37.9 million were up 10.3% on the previous corresponding period.

Earnings before net finance expense, tax, depreciation and amortisation and gain on sale were down 8% to $10.8 million as a result of a $1.6 million increase in Ralec litigation costs, with the Ralec trial concluding in July. Excluding costs associated with that litigation, EBITDA was up 5.3% to $13.7 million.

Net profit after tax of $3.6 million included an impairment charge on brand assets in NZX’s agri business and an adjustment to the provision for the NZX Wealth Technologies (NZXWT) earnout.

Excluding these items and the gain on the sale of NZX’s stake in Link Market Services in the prior year, net earnings of $4 million were 34.9% down on the prior year.

Funds under management in SuperLife’s KiwiSaver business grew 26.6%, while total SuperLife FUM increased by 13.1%. Highlights in that business included winning four new group superannuation mandates, NZX said.

Total external FUM in NZX’s Smartshares business – which provides a range of 23 ETFs – was up 6.9% on the same period last year.

Smartshares, incorporating SuperLife, has been granted a licence as a manager of a registered scheme by the FMA under the FMCA. As part of the process of FMCA compliance, NZX will amalgamate the Smartshares and SuperLife legal entities in the last quarter of this year, although the brands will remain separate.

NZX acquired NZX Wealth Technologies, formerly Apteryx, in August 2015.

Earlier this month NZX announced it had signed an agreement with Craigs Investment Partners to provide the NZXWT platform for Craigs’ KiwiSaver product.

NZX said it was talking to a range of other potential clients about their future requirements for wealth platforms.

Rules for bankrupt KiwiSaver members cause concern

A Court of Appeal ruling has given KiwiSaver balances more protection than other retirement savings when someone enters bankruptcy – a situation that has the Ministry of Business, Innovation and Employment concerned.

MBIE wants to change the law after the ruling put KiwiSaver funds beyond the reach of the Official Assignee.

MBIE is seeking submissions on its options to create a uniform policy approach to retirement savings in bankruptcy.

​When a person is declared bankrupt, assets such as houses or direct investments into managed funds are normally accessible to repay creditors. 

But the treatment of the assets held in KiwiSaver accounts and other retirement schemes differs depending on the type of scheme.

At the beginning of last year, there were 5559 bankrupts with KiwiSaver accounts with a total known value of over $27.3 million. The average value of these accounts is $6070.

One of the bankrupts, Mr T, has been a member of a KiwiSaver scheme since 2007 and was adjudicated bankrupt in June 2010 at the age of 25. His proofs of debt amounted to $26,254 although there may have been other unproved debts. There are no assets in the bankrupt estate other than Mr T’s KiwiSaver interest amounting to $11,860.46 at the date of adjudication.

The second bankrupt, Mr H, has been a member of a KiwiSaver scheme since January 2008. He was adjudicated bankrupt on Novembr 4, 2010, at the age of 34. Claims notified by creditors amounted to a sum in excess of $32,000 although proofs of debt for only $9,583 were actually received. Mr H has no assets other than his KiwiSaver account and a small tax refund. His KiwiSaver interest totalled $10,805.98 at the date of adjudication.

The Official Assignee asked Trustees Executors to release the funds in the KiwiSaver accounts of the two bankrupts under the significant financial hardship provisions of the KiwiSaver Act.

It refused to release the funds, contending that the KiwiSaver interests of the bankrupts were not property and did not vest in the Official Assignee on their bankruptcy. It  took the view that, in any event, the significant financial hardship provisions of the KiwiSaver Act would not permit the early release of the funds.

The Court of Appeal backed Trustees Executors.

But other retirement schemes do not receive the same level of protection. Access to these savings to repay creditors is governed by the rules set out in the individual scheme’s trust deed and the Insolvency Act 2006.

MBIE has set out three broad options for reform.
Option 1: all retirement savings of a bankrupt member to be available to the Official Assignee (excluding any Crown contributions).
Option 2: allowing all personal retirement savings contributions to be accessed by the Official Assignee (excluding Crown and employer contributions).
Option 3: allowing the Official Assignee to access a fixed percentage of all retirement savings, including Crown and employer contributions.

Commerce Minister Paul Goldsmith said the options were designed to start discussion and that further alternatives were open to consideration.

A further option is that none of the retirement savings ought to be available.  An exception would remain for voidable payments made into the scheme prior to bankruptcy.

It is also asking whether foreign savings should be made available, and whether it matters that easy liquidity of retirement savings means they are accessed first, which may allow bankrupts to exit bankruptcy sooner without having to sell other assets such as a house.

Submissions close at the end of September.

Study to assess ways to help KiwiSaver members get better results

A trial has begun that will investigate the effectiveness of behavioral interventions to help KiwiSaver members make better financial decisions.

The six-month project is an initiative from Kiwi Wealth, the Financial Markets Authority (FMA), the Commission for Financial Capability, and the Ministry for Business Innovation and Employment (MBIE).

It will test how changes to the design and phrasing of enrolment communications can prompt people to assess and change their fund to suit their retirement expectations. 

The trial, beginning this week, is expected to include approximately 3000 new entrants to the Kiwi Wealth KiwiSaver Scheme.

Joe Bishop, Kiwi Wealth head of retail wealth and marketing, said simple changes to how providers spoke with their members could have a big impact on their financial decisions and future retirement income.

“We’ve observed that new KiwiSaver members are most likely to switch from default funds within the first month of enrolling.  The actual number of people switching is still quite small however, with only about 5% of members doing so,” he said.

“Currently, provider communications to new members is dull, very transactional, and has little emphasis on their future retirement income.  With this trial, we’re tweaking our communications so KiwiSaver members are prompted to make decisions now with the end goal in mind, growing their retirement income.

“Improvements to the design of the welcome letter and how words are phrased might seem like simple details, but the science suggests they’re powerful motivators.  When you consider there are 2.5 million people enrolled in KiwiSaver, the smallest upswing in people’s engagement with their fund could lead to a massive improvement on Kiwis’ retirement savings.”

In April, the FMA published a cross-government paper which assessed how personal preferences and beliefs can influence financial decision making.  It found that people typically have a natural bias for the status quo which makes them better at day-to-day money management but less inclined to consider long-term financial planning.

To help people overcome this bias, the paper cited four interventions that have shown to result in effective and measurable behavioural change.  Known as the EAST framework, it says communications could be more persuasive if they are:

·         Easy – simple language and reducing the perceived hassle with changing funds.
·         Attractive – framing communications so that its interesting with a strong call to action to change funds.
·         Social – showing that others are changing funds and improving their retirement income.
·         Timely – prompt action when people are likely to be most receptive (when they first enrol).

Paul Gregory, FMA director of external communications and investor capability, said: “The best time to help New Zealanders focus on making good financial decisions is when they’re actually doing it and so this is where providers have an essential role. So, as well as the work government agencies are doing, we look to industry to use these insights positively: in their product design and marketing, disclosure, and in their sales processes for all products including KiwiSaver.”