David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: DIY super for Kiwis not on schedule

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The Government is not so keen on New Zealanders doing a bit of their own DIY superannuation saving. Photo / Thinkstock
The Government is not so keen on New Zealanders doing a bit of their own DIY superannuation saving. Photo / Thinkstock

For superannuation aficionados, Schedule 3 of the Financial Markets Conduct Act (FMC) makes for titillating copy.

"The purpose of this schedule is to provide for the statutory recognition of single-person self-managed superannuation schemes," begins Schedule 3 in an exciting come-on.

But it's all a big tease, according to Chapman Tripp partner, Mike Woodbury.

Anyone eyeing up Schedule 3 as a potential exit from the institutional conformity of their traditional KiwiSaver relationship is only doomed to frustration, Woodbury says.

He says Schedule 3 is merely a "quick and dirty" solution that marries legacy individually-run super schemes with the FMC, rather than an invitation to join the wildly-popular Australian self-managed super fund (SMSF) orgy.

The 2013 Financial Markets Authority (FMA) 'Superannuation Schemes Report' records a meagre 238 'private' schemes, representing 250 individuals.

Woodbury says these are likely to be judges, MPs and other assorted high net worth individuals who launched their own super schemes in happier days.

The FMA report shows 'private' super schemes managed $174 million as at December 2012, or $696,000 for each of the 250 members.

Across the Tasman, however, SMSFs represent the biggest, and fastest-growing, sector of the Australian super system. Figures from the Australian Tax Office reveal SMSF members topped the 1 million mark for the first time this March.

While SMSF members account for about 12 per cent of Australian taxpayers, collectively they control about one-third of the A$1.85 trillion currently sloshing around in the super pool. SMSFs are alluring to higher-income Australians for several reasons: flexibility of investments (members can tip in some business assets, art, collectibles and other exotics); tax breaks; family estate planning opportunities etc.

However, the wealthy drift to SMSFs also reflects a significant level of distrust in the institutions running mainstream Australian super funds. Whether SMSFs in aggregate manage their super money better than the professionals is moot, but the DIY urge is strong.

Given the opportunity, many New Zealanders would likely go for a bit of SMSF, too. The NZ government, though, is not so keen on the idea, specifically excluding, for example, SMSFs from the trans-Tasman super portability agreement.

Woodbury says the SMSF transfer window is unlikely to open "any time soon". And Schedule 3 won't kick the DIY door open for KiwiSaver either: the two are fundamentally incompatible.

- NZ Herald

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

Read more by David Chaplin

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