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Stewart aiming to launch NZIG in October

Ralph Stewart is hoping to have his business, NZ Income Guarantee up and running by October this year after gaining some key support including a potential backer.

Thursday, June 12th 2014, 6:05AM 4 Comments

Stewart stresses NZ Income Guarantee not an annuity product, however it does provide people with a guaranteed income in retirement.

He says someone who puts $100,000 into the product is essentially topping up their state pension, NZ Super, by 25%.

“Traditional annuities are no longer relevant for investors and providers,” he says. “They require investors to surrender their capital, receive fixed interest returns, pay relatively high fees, suffer tax imposts and in most cases have no future liquidity. For providers the capital requirements are high and the margins low.”

“Lifetime Income products are completely different always leaving the capital under the ownership of the investor, earning returns based on the performance of an underlying portfolio of balanced passive funds, offering liquidity for the investor or the estate at any times and paying regular income for life free of tax.”

The key hurdles NZIG face are getting a binding ruling from Inland Revenue, becoming a licenced life insurance company and finding the capital to get going.

Stewart says IRD have agreed that the withdrawals form this product should not be taxable, however will not issue the final ruling until the have reviewed the final offer documents.

Once those are available he expects the ruling will be issued.

Stewart has been working with the Reserve Bank on getting a licence and says good progress is now being made. Currently the central bank is developing a set of appropriate solvency provisions for these products, which it plans to release to the market.

Stewart says he is talking to parties becoming investors so it has the necessary capital to met solvency requirements and has strong expressions of interest.

« Academic approach to planningIFA working on pro-bono offering »

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Comments from our readers

On 12 June 2014 at 8:55 am Bernard McCrea said:
Congratulations Ralph on getting to this point. I know its been sometime in the pipeline but I am sure it will be worth the wait. Pleasing to see another option available for the people who want and need this product at an important time for their retirement planning.
Bernard
On 15 June 2014 at 12:10 am Michael Donovan said:
Mmmm, I recall (when I was an investment planner) the situation that existed several years ago where registered super schemes offered tax free returns, simply because the underlying portfolio/s (of the only 3 main asset classes of shares, property & fixed interest)paid tax at the rate of 33% on both the inherent income produced "along with" the same 33% tax paid on any capital gain produced within.

The obvious result was that those on a lower income tax rate than 33% (eg; 24%) were disadvantaged by a tax rate applied on returns by an "extra" 9%.

And worse still, because the same citizen investors normally lived without any capital gains tax applicable to themselves, they suddenly became cursed with a 33% capital gains tax!

Yes, we are not now living years ago, however, today, "what is it that I seem to not know" regarding any perceived benefits of investing where returns are "not taxable?"

The term "not taxable" should not be mis-contrued.
Michael Donovan
On 15 June 2014 at 9:02 pm Michael Donovan said:
Mmmm, I recall (when I was an investment planner)the situation that existed several years ago where registered super schemes offered tax free returns, simply because the underlying portfolio/s (of the only 3 main asset classes of shares, property & fixed interest)paid tax at the rate of 33% on both the inherent income produced "along with" the same 33% tax paid on any capital gain produced within.

The obvious result was that those on a lower income tax rate than 33% (eg; 24%) were disadvantaged by a tax rate applied on returns by an "extra" 9%.

And worse still, because the same citizen investors normally lived without any capital gains tax applicable to themselves, they suddenly became cursed with a 33% capital gains tax!

Yes, we are not now living years ago, however,today, "what is it that I seem to not know" regarding any perceived benefits of investing where returns are "not taxable?"
The term "not taxable" should not be mis-contrued.
Michael Donovan
On 17 June 2014 at 12:30 pm Ralph Stewart said:
Hi Michael
Yes.. remember the old world as you do ! Our proposal is very different. We are in the final stages of securing a binding tax ruling confirming our treatment of capital repayments as being tax free. The investor receives regular capital withdrawals (income payments) and yes PIE tax (own marginal tax rate) on their underlying investment earnings according to their own personal circumstances. Best Ralph

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