Helen Twose

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: Regulation makes KiwiSaver schemes safer

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KiwiSaver funds are governed by legislation and must have a custodian and trustee along with the manager.

KiwiSaver schemes are governed by KiwiSaver legislation, says Helen Twose. Photo / File
KiwiSaver schemes are governed by KiwiSaver legislation, says Helen Twose. Photo / File

I've been reading with horror about the millions lost by investors in Ross Asset Management, a seemingly solid and well-established firm.
What's to stop something similar happening to a KiwiSaver scheme?
How can investors be assured they aren't tipping their money into some elaborate Ponzi scheme?

KiwiSaver schemes have significantly more regulatory compliance requirements than the discretionary management service offered by Ross Asset Management.

KiwiSaver schemes are governed by KiwiSaver legislation, are required to have a custodian and trustee along with the investment manager and have to provide an investment statement, prospectus and audited financial accounts. By using independent sources to value and verify the investments held, the funds that are managed are under a wider scrutiny, which prevents false reporting to investors.

So a very simple message for investors is to invest in investment vehicles such as KiwiSaver funds with an independent custodian, independent pricing and with annual accounts and investment statements and prospectuses published and available.

Also check the fund and investment firm are audited by a reputable auditor.

The PIE and KiwiSaver regime provides all these checks and balances, meaning an investor then only has to worry about the underlying investment risk - which of course should be the main issue for any investment.

•Anthony Quirk, Milford Asset Management managing director.

Q: My son has been in KiwiSaver since its inception.
We are looking to cut off a section of our 8ha block for him to purchase a house and land package.
We are not able to subdivide for two years and plan to have this legally drawn up to settle on once title is through.
Our son is obtaining a bank mortgage in his own name, therefore we regard this as his first home, first mortgage.
Although the property won't legally be in his name at this point, do you see any issues in him having his KiwiSaver and first home government assistance paid out?

The purchase of a house or a bare piece of land has to be in the name of the KiwiSaver member.

It may be in joint names or in a trust's name but one of the jointly named persons or trustees would have to be the member withdrawing the funds for a first home.

In terms of bare land there also has to be a clear intention to build within 12 months.

The situation is complicated as while the mortgage is in the son's name, the land title is not and therefore it would be difficult to see how the son had purchased the land until such time as his name appeared on the title.

•Sean Butler, Fidelity Life Assurance investment specialist.

Emma Harding, Chapman Tripp senior solicitor adds: The KiwiSaver Scheme Rules allow the manager of a KiwiSaver scheme to require from the member's solicitor (before the payment of a first home withdrawal) certain undertakings and a copy of the sale and purchase agreement showing the member as purchaser.

It has become standard practice for the manager to require such undertakings and a copy of the sale and purchase agreement.

One of the undertakings is that the agreement is unconditional at the time the manager requests the undertaking.

Given the situation, it would appear that the member (at the time of application) would not be able to provide a copy of a sale and purchase agreement showing him as a purchaser and that even if he could do that, the agreement would not be able to be conditional on the subdivision being legally drawn up once title is through.

I too find it difficult to see how the son has purchased the land without his name appearing on the title.

Q: I turn 65 in March 2013 and as I will no longer be able to claim the tax credit after that I will withdraw my funds although I intend to keep working, possibly only part-time, for a while.
Will I receive the full tax credit for the financial year or will I need to continue contributing until June 30, 2013 to get my full tax credit for that final year?

When you turn 65 in March 2013, if you have been in the scheme for five years you will be able to withdraw your funds.

Your member tax credits are calculated pro rata according to your own contributions and eligibility during the member tax credit period July 1 to June 30 each year.

As long as you are eligible for a KiwiSaver retirement withdrawal in March 2013, you will not be eligible for further member tax credits after that date.

You will receive a prorated amount of member tax credits for the period July 1, 2012 to your KiwiSaver retirement withdrawal eligibility date in March 2013.

This works out at $10 a week until the March date, provided you make contributions averaging out at $20 a week over that same period.

•David Boyle, ANZ Wealth general manager of funds management.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose, helentwose@gmail.com.

- NZ Herald

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