David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: Release the funds - a dingo kept my savings

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The trans-Tasman agreement on superannuation portability was touted as a high point in New Zealand/Australian economic relations but as Ben Chapman-Smith revealed in a NZ Herald article this week there's less to this than meets the eye.

The point blank refusal of the Australian arm of AMP to process a transfer request of a NZ citizen on the grounds that participation in the scheme is not compulsory has seemingly exposed a major flaw in the cross-border portability regime.

If the Australian super funds or KiwiSaver schemes don't have to facilitate a transfer, why would they bother?

Both the then-Australian superannuation Minister, Bill Shorten, and NZ's finance Minister, Bill English did, in fact, emphasise the voluntary nature of the agreement in their respective press releases celebrating the passing of the Australian Bill that legitimised the process last November.

(As I have previously noted the Australians took two years longer than NZ to introduce the relevant legislation.)

However, AMP Australia's obtuse 'voluntary' opt-out statement is disingenuous at best. The Australian super transfer legislation is (deliberately?) vague but it does imply that Aussie super funds do have to transfer to KiwiSaver schemes on request.

The actual wording in the explanatory memorandum accompanying the Australian law states: "... the transfer of retirement savings is voluntary for members, and voluntary for funds to accept the transferred savings."

It is a mystery why the Australians didn't explicitly state that their super funds had to act on legitimate requests to transfer to KiwiSaver schemes - particularly as the flaw was pointed out during consultation.

In its submission (one of only eight) on the matter, Mercer Australia noted that the proposed law did not state "whether it will be mandatory for an Australian fund to transfer a benefit to KiwiSaver on request", which it said "should be clarified".

To be charitable to the Australians, the legislation was rushed through near the end of a parliamentary session and perhaps the point was considered minor - although, the influence of the powerful Australian funds industry could also be a factor in this ambiguous wording.

There are no such loopholes in the New Zealand version of the law, which states:
"As soon as practicable after receiving a satisfactory application, the trustees or the manager (as the case may be) must transfer the whole of the member's accumulation to the relevant Australian complying superannuation scheme and provide that scheme with any necessary information it reasonably requires."

According to KiwiSaver industry people I've spoken to, the main reason Australian funds are holding off on the few transfer requests made so far are mainly due to technical reasons rather any interpretation of the 'voluntary' nature of the legal agreement.

And that's understandable, with the Australian super industry currently implementing a raft of other major legislative changes, KiwiSaver transfer codes are way down the IT to-do list.

Indeed, most of the Australian submissions on the trans-Tasman super portability law were complaints about the problems involved in receiving KiwiSaver transfers not sending funds to their New Zealand cousins.

And that makes it all the more extraordinary why AMP volunteered itself out transferring Louise Lawson's Australian super to her KiwiSaver account. From a PR perspective, at least, it might have been safer to play the 'systems and processes' card.

But there are other ways Lawson could release the funds from her current provider. Under Australia's 'super choice' regulations, members can transfer their savings to other complying Australian superannuation schemes on request - perhaps some are more accommodating to KiwiSaver transfers than others.

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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