Mary Holm 's Opinion

Mary Holm is the NZ Herald's writer on money and finances

Mary Holm: Bank link raises thorny Kiwisaver questions

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Account provider can’t use KiwiSaver funds to settle debts without permission, but there could be exceptions

In the event of bankruptcy, a bank or other creditor might be able to get a court action to access funds, says the IRD. Photo / Thinkstock
In the event of bankruptcy, a bank or other creditor might be able to get a court action to access funds, says the IRD. Photo / Thinkstock

Q: I have my KiwiSaver with One Path, which is of course owned by ANZ.

When I read my bank statement online my daily KiwiSaver balance is showing with my other accounts.

If I owed money to ANZ, would it be permitted to deduct what is owing on other accounts when I reached 65 years old, or is it not permitted by law to touch my pay-out balance?

A: Ask a simple question and you get not quite such a simple answer.

"The KiwiSaver Act states that a member's interest or future benefit cannot be assigned to another person," says an Inland Revenue spokesperson. "This means the bank, as a creditor, would not be able to use a person's KiwiSaver funds to settle a debt without the member giving consent."

However, "in the event of bankruptcy, a bank or other creditor might be able to get a court action to access those funds in order to settle debts", says Inland Revenue.

Still, that could happen regardless of who your KiwiSaver provider is. It would be irrelevant that the bank is both creditor and KiwiSaver provider.

An ANZ spokesperson adds more about the bankruptcy situation. "A recent High Court case has held that the value of a bankrupt's KiwiSaver account, accumulated up to and during bankruptcy, vests in the Official Assignee.

"The Official Assignee is only able to access those funds when the bankrupt member is eligible for a withdrawal (that is, on retirement or earlier, if the grounds for an early withdrawal are satisfied).

"If eligible for withdrawal, the Official Assignee can use the bankrupt's KiwiSaver funds to pay the bankrupt's creditors."

But, the spokesperson adds: "The High Court case is being appealed, as certain aspects of the judgment require further clarification."

There's another possibility here, too. When you're 65, if you want to spend some or all of your KiwiSaver money, it will be transferred into a bank account. Could the bank at that point use the money to pay off debt?

Says the ANZ spokesperson: "The member must specify which of his or her bank accounts they want their withdrawal to be paid into on the retirement withdrawal application form. Again, the bank can't apply the member's withdrawal proceeds against other debt unless requested by the member."

ANZ adds that every KiwiSaver scheme has an independent trustee, "that is required under the KiwiSaver Act 2006 to act in the best interests of the members of the scheme".

The trustee "supervises how the manager runs the ANZ KiwiSaver Scheme, for the benefit of members. This acts as an additional safeguard to protect members' interests and enhance investor confidence".

Still worried? You can always move your money to a different KiwiSaver provider, now or before withdrawing it. Or you could have the money you want to withdraw transferred into an account with a different bank.


Reluctant contributor

Q: Why am I bound by KiwiSaver rules when I have never actually signed anything? Why is it so hard to get it out when it is my money? The Government can keep its money as far as I'm concerned — I just want the money that I have worked for.

A: The answer to your first question is that it's the law of the land. You don't sign up to pay tax, either.

You've obviously been auto-enrolled into KiwiSaver when you got a new job and didn't opt out after two to eight weeks. Your employer should have given you information about this - and you should have read it. Sorry to be harsh, but everyone's got to take some responsibility for keeping track of what money is taken out of their pay.

On withdrawing your KiwiSaver money, if you haven't yet bought a first home, you can withdraw most of the money in your account for that. Otherwise, the money is stuck there until retirement, unless you strike serious illness or financial hardship or go overseas.

However, you can easily stop making further contributions by taking a contributions holiday once you've been in the scheme for at least a year. Click here for information on that.

Alternatively, you could look into the advantages of KiwiSaver and keep contributing. It's a pretty good deal.


Australian pensions


When applying for NZ Super, one must declare if they have lived in any other countries, as you may be entitled to an overseas pension. Photo / Thinkstock

Q: A very informative article ran last week on New Zealanders needing to claim the Australian pension.

Is it right that a person working for a year or two on an OE in their early 20s, paying little tax at the time, would get the Australian pension more than 40 years later, after decades of paying tax of say $800,000-plus in New Zealand?

If so, it seems very unfair to Australian taxpayers.

So would you please clarify the length of time, and time since working in Australia, for people to get their pension?

Many, many people here have at some time worked in Australia.

A: You're quite right. Aussie OEs are two a penny.

To get others up with the play, "when applying for New Zealand Superannuation, you must declare whether you have lived in any other countries, as you may be entitled to an overseas pension", says Lindsay Meehan, general manager, senior services at the Ministry of Social Development.

He adds: "The overseas residence can have occurred at any time. The time spent in the country and other qualifying criteria for an overseas pension are determined by the country paying the pension into New Zealand.

"For example, if you have spent a minimum of 12 months in Australia between the age of 20 and 65, with at least six months continuous, you may be entitled to an Australian Age Pension, and you are legally required to test your eligibility for a pension."

Meehan continues: "The ministry does screen applications to determine whether a person is asked to apply for the Australian Age Pension. Those people who are able to demonstrate that their time in Australia does not meet the Australian resident criteria and/or provide evidence that their income and assets are above a threshold set by Centrelink will most likely not be required to test their entitlement."

But let's say Fred does have to apply for the Aussie pension. Could it result in Australia effectively paying most or all of his NZ Super, even though Fred spent the vast bulk of his working life in this country — which I agree does seem unfair?

No, says the Australian Department of Human Services. Even if Fred qualified for the Australian pension, the amount he got would be proportionate to how much of his working life — the 45 years from 20 to 65 — he worked in Australia. If it was just two years, the pension would be a tiny 2/45 of the full entitlement. For an example, see the next Q&A.


Pension pittance

Q: I had to have a little chuckle when I read last week's column about applying for the pension.

I am an Australian citizen but have lived in New Zealand since my late teens. When I applied for NZ Super in 2012, I started at the beginning of the recommended period before you turn 65 (I think it was a couple of months).

That was just as well as you are right, there are 27 pages for the Australian pension as well as several for the New Zealand one. And because I am a partner in a business I think there were about 45 pages required just for the Australian side (as well as annual accounts, etc, for the business).

I assumed that my assets were already over the threshold for the Australian pension, but I still had to fill it in. And because I had, at one early point, gone back and worked for a couple of years, I "qualified" for the Australian pension.

The joke started when they decided I was to be the recipient of $1.84 a week. Over the next couple of years, I got letters changing this amount from $2 to nothing, then to $1 a week. I continue to receive updates and newsletters, which now just go straight in the bin.

Nevertheless, I must say your reader has nothing to fear from the New Zealand side. I found Winz to be extremely helpful, and anything I could not answer it helped me fill in, as well as photocopying any documentation needed.

A: You'll just have to live long enough to make that $1 or $2 a week worth the effort you put in! Of course you personally don't get extra money, but I'm sure the taxpayers of New Zealand are grateful to you, as our Government ends up spending a smidgen less on you.

It's probably fair to say that nobody on either side of the Tasman would have known beforehand that the amount you would receive would be so puny. It does make you wonder, though, whether there shouldn't be a minimum cutoff level once the amount is established.

Anyway, it's reassuring to know the New Zealand officials were so helpful. Meehan confirms that. "The paperwork that needs to be completed for an overseas pension is from that country. We appreciate that this can be onerous in some cases. We are happy to help people fill out their application for an overseas pension and will offer whatever support we can to do this."


Keeping records

Q: I was interested in your explanation about overseas government pensions. I recently had to apply for the British pension, which required listing all employment in Britain with dates. I was lucky in that I had only had one job. I left when I was 21, so it was a long time ago! I think people should be advised to keep an accurate record of all their employment for occasions like this.

A: Good tip. Diligent people might have that data anyway, on their CV — although some of the jobs some of us took while on our OEs are hardly CV material!


Car purchase

Q: Perhaps not a question but a comment regarding the withdrawal of $20,000 from KiwiSaver to buy a new car, as discussed in recent columns.

I can think of no better "new" car to purchase than the picture accompanying one of the columns, of the 1973 Triumph TR6. A mint one, however, is worth closer to $30,000-plus. I will be on the lookout for a mint TR6 shortly but will have to pay off the mortgage first and will be paying cash.

Do you have any tips about negotiating with the older grey-headed gentlemen who tend to own these types of cars?

A: You must be a true fan, being able to recognise the car from what little you could see of it in the picture.

I'm no expert on negotiating. But I have noticed that if you're buying something that the seller loves — whether it's a car, house, boat or work of art — they often want to sell to someone who will cherish it the way they have. So if you express your appreciation, the seller may be willing to settle for a lower price than otherwise.


Mary Holm is a freelance journalist, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.

Send questions to mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.

- NZ Herald

Mary Holm

Mary Holm is the NZ Herald's writer on money and finances

Mary Holm is a columnist, best-selling author and seminar presenter on personal finance. She is also a director of the Financial Markets Authority and the Banking Ombudsman Scheme, and holds an MBA in finance. Previously she was business editor of the Auckland Sun and Auckland Star, and has worked for the NZ Listener, Australian Financial Review and Chicago Tribune. She has been called “The nation’s favourite investment agony aunt.”

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