Canny View: Simply super surprise

Finding $20 in your pocket is always great but imagine finding thousands of dollars in super that you had lost track of?

According to the Australian Taxation Office, as at May 17, 2019, there was A$17.5 billion funds in lost and unclaimed super money, and we know that a large proportion of these funds belongs to Kiwis.

The cordial relationship we have with our closest neighbours, (outside of the rugby pitch) means that we enjoy the opportunity to live in each other's backyard.

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With golden beaches and a warmer climate, there are estimated to be more than 650,000 New Zealanders living in Australia, and a larger number lived and worked there, before heading back to this side of the ditch.

While New Zealand was a little slow off the mark with setting up KiwiSaver in 2007, Australia was ahead of the curve.

Australia enforced compulsory superannuation in 1992, building on the superannuation system they had in place for union members. Here, KiwiSaver is still not compulsory.

To put this lag effect into perspective, the total value of KiwiSaver recently surpassed $57 billion while the Australian superannuation market is valued about A$2.9 trillion at the end of the June 2019 quarter.

One of the interesting features of compulsory superannuation in Australia is the tie with personal insurance, such as life and income protection.

By law, people in Australia are passively channelled into life insurance policies, which provide for income protection insurance and lump-sum pay-outs on death or total and permanent disability – through "group" deals struck between insurers and super funds.

They are structured on an "opt-out" basis, which means premiums are paid directly from the member's super fund unless the member specifically opts out.

For those Kiwis that we meet, with Australian superannuation, many of them forgot to cancel/opt-out of the insurance cover they have in place in Australia.

Unfortunately, they are often paying for something that does not exist as many of the insurance policies that we've seen have clauses that cease the insurance cover once the member has left, or is no longer a resident of, Australia.

As insurance premiums and super fees are charged directly out of the member's super fund, the result is often reduced returns on your investments. And for those who had multiple jobs in Australia, they may be paying fees on multiple supers. The good news is that effective from July 1, 2019, super funds will cancel insurance on super accounts that have not received contributions for at least 16 months.

But if you didn't know the policy rules and hadn't opted out of your insurance, the insurance premiums could continue eating into your nest eggs for another 16 months from the day your super account stopped receiving contributions.

If this sounds familiar to you, don't let it continue.

Under the Trans-Tasman Savings Portability scheme, returning Kiwis and Australians who permanently emigrate to NZ, can transfer their supers to a KiwiSaver scheme.

There are various pros and cons to consider, as well as the need to complete certain documentation, but it's an option that many more super holders are acting upon.

Get in touch with a financial adviser today to discuss your super situation.

• Geoff Wilson is a financial adviser and KiwiSaver specialist at Stewart Group – a Hawke's Bay-based CEFEX certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance, KiwiSaver and UK & Aussie Pension Transfer solutions.

• The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz