Little for advisers in trans-Tasman portability

And concerns have been raised that investors could end up getting a raw deal unless a way is found to get financial advisers involved in the process

With an estimated half a million New Zealanders living across the Tasman, the recently-announced portability of funds from Australian compulsory superannuation accounts into KiwiSaver could open up a big market.

But David Milner, an Authorised Financial Adviser who specialises in UK pension transfers to New Zealand, said there were some key differences between the UK’s QROPS regulations and the rules that are likely to govern switches from Australia.

“Under the QROPS regime HMRC [the UK tax office] don’t mind if you take a fee but KiwiSaver is very restrictive around what fees can be charged; you can’t pay it out of transferred funds.”

As a result, advisers would have to charge up-front fees, which many consumers would be reluctant to pay: “It might take $2500 to do a proper analysis,” he said.

Milner said without proper advice consumers could miss out on important information including relative tax rates, currency, fees and performance and the age of eligibility to withdraw (60 in Australia versus 65 for KiwiSaver).

“You’re going to get KiwiSaver schemes probably marketing direct to transfer over without any proper analysis.”

DLA Phillips Fox partner Tracey Cross confirmed current KiwiSaver rules wouldn’t allow for advisers to be paid from a transferred fund and said it was unlikely the issue was on politicians’ radar.

“In the portability space they’ve taken so long in actually getting the legislation through that I’m not sure they’ve much thought to the detail of it,” she said.

“I wouldn’t think it’s envisaging any deductions at this stage; the requirements are quite stringent and they wouldn’t want to be seeing it transferred elsewhere.”

Comments from our readers

On 28 December 2012 at 9:43 am Zodiac said:

Mr Milner should check his facts. It appears that the IRD will allow access to Aussie funds @ age 60. Refer http://taxpolicy.ird.govt.nz/sites/default/files/2009-other-nz-australia-retirement-savings-portability-agreement-qa.pdf

On 31 December 2012 at 2:38 pm David Milner said:

Yes, quite true……the agreement on retirement savings portability between NZ-Australia does allow access to transferred savings consistent with the jurisdiction of origin. This seems to favour New Zealander’s transferring from Australian complying schemes to Kiwisaver schemes – but does it?

The draft rules seem to indicate that the only funds that can be withdrawn at age 60 are the actual funds transferred – not any gains made whilst invested in the KiwiSaver receiving scheme. If this is the case why would anybody contemplating using the withdrawal of funds at age 60 to pay off a mortgage commitment for example, consider transferring to a KiwiSaver scheme when leaving the funds in Australia will allow the total accumulation to be withdrawn?

Little for advisers in trans-Tasman portability

Financial advisers are unlikely to get as much business from trans-Tasman superannuation portability as they have from UK pension transfers, experts say.

Thursday, December 27th 2012, 6:00AM 2 Comments

Comments from our readers

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