Inside Money: Why you can't save your way (or their way) yet
9:30 AM Thursday Sep 27, 2012
Departing KiwiSavers will not be permitted to export their savings into an Australian self-managed superannuation fund. Photo / Thinkstock
Australia's self-managed superannuation fund (SMSF) industry is slightly irked it has been excluded from the trans-Tasman KiwiSaver transfer market.
As I detailed last week, the recent Australian draft legislation authorising transfers between KiwiSaver accounts and Australian superannuation funds explicitly cut SMSFs out of the loop.
That is, departing KiwiSavers will not be permitted to export their savings into an SMSF (but I expect SMSF money could flow the other way).
Peter Burgess, SMSF Professionals' Association of Australia (SPAA) technical director, told me the news surprised him.
"I thought the New Zealand government was a bit more relaxed about SMSFs now," Burgess said.
But despite the efforts of Australia's SMSF advocates to educate our officials it seems the uptight attitude prevailed.
What does the NZ government have against SMSFs? Burgess wasn't sure.
SMSFs are highly-regulated, albeit on slightly different terms than their more institutional competitors.
My guess is that NZ officials were concerned that SMSFs would be less inclined than corporate entities to adhere to the rule requiring any KiwiSaver-transferred money to remain under wraps until the beneficiary turned 65 (whereas SMSF members can access their savings as early as 55).
And while that might be possible, the potential early leakage of KiwiSaver money into the Australian spending economy shouldn't be such a big deal to the NZ government. I don't see that it would be a great incentive (as if any more are needed) to move to Australia.
Burgess rightly complained that excluding SMSFs from KiwiSaver transfers would prevent individuals from accessing one of the most successful retirement savings options open to Australian residents.
The latest statistics reported by the Australian Tax Office show SMSFs had a bumper year, growing almost 8 per cent in the 12 months to June 30, 2012. As at that date there were almost 480,000 SMSFs representing just under 920,000 individuals and about A$440 million (or about one-third of the total Australian superannuation pool).
Burgess told me SPAA would lobby the Australian and NZ governments to reverse the SMSF ban. In fact, he thought the NZ government was already mulling over an SMSF-like option for KiwiSaver.
Some local providers are also expecting the NZ government will eventually devolve more investment responsibility to KiwiSaver members.
Craigs Investment Partners, for example, offers a quasi-SMSF for KiwiSavers, dubbed kiwiStart Select , but it's still a long way from the Australian model.
Interestingly, Graham Duston, head of the investment group that runs the SBS KiwiSaver fund, told me recently the scheme had rewritten its trust deed to allow for more flexible, individual investment selections in the future.
That's choice bro.
These provide guarantees to protect your private property from government acts. Stopping a person from accessing their own retirement money for another 10 years is interference with your private property (ie your savings $). While the prohibition on transferring Kiwisaver funds to a SMSF is supported by Australian legislation, one has to question why the NZ government has asked for this control on funds that have left the country.
What is the underlying policy rationale since the money has been transferred out? In short this is an ongoing shackle for Kiwis when living in Oz. Kiwis are entitled to Oz pensions (after the normal waiting period) The NZ government should have no interest in restricting access to your funds when they leave NZ. If you emigrate to another country, you can take most of your Kiwi-saver money with you, so why is it different for Oz?
Those gains made this decade are about to be wiped out and if the $1 trillion in super funds start to sell off equities all at once to avoid it, there is even more downside.
So the call will soon go out to super fund members to hang in their for the long run as they watch their retirement nest eggs disappear as termination, management fees, and an equity downtrend cut heavily into these locked in status funds to ensure there is nothing left at the end. Australian Govt intervention is already on the agenda apparently.