Self managed KiwiSaver likely

Self-managed super funds may be a feature of KiwiSaver in the medium to longer-term, says ASB’s executive general manager of wealth, Blair Turnbull.

Wednesday, June 26th 2013, 7:37AM 6 Comments

by Susan Edmunds

Self-managed super funds (SMSF) are a big part of the Australian superannuation market, and are the fastest growing segment.

Turnbull said 40% of the Australian sharemarket was owned directly or indirectly by superannuation monies, about ten times the amount in New Zealand. “A big part of that is the self-managed funds.”

He said he was optimistic that it was a feature of the Australian superannuation scheme that would be picked up by KiwiSaver eventually. It has been suggested that SMSFs would work well here because of the high number of people who are self-employed or running small businesses.

The KiwiSaver accounts of many New Zealanders will get a boost when Australian super funds are able to be transferred here, from the end of the month.

Turnbull said advisers should ask clients to find their taxation file number, which would enable them to track down any superannuation funds owing in Australia. They could then take that to their KiwiSaver provider and have the money transferred here.

He said setting the capacity to cater for transtasman portability of super funds had cost ASB hundreds of thousands of dollars, as it set up systems and operations, links in Australia and compliance. It will not charge customers to transfer money.

He said there was no rush. “This isn’t a window of opportunity.”

People who had worked in Australia could transfer the money at any time. But he said there had already been a surprising amount of interest from those interested in bringing Australian savings home.

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Comments from our readers

On 26 June 2013 at 9:48 am Mac said:

For a start, if self managed funds were introduced into NZ, then the loan facility would need to be structured into the arrangement to get similar success rates to the Australian model. A flat tax rate of 15% would also be of benefit!

On 26 June 2013 at 8:33 pm John Milner said:

Clients managing their own investments. Isn't that the same as giving a machine gun to a monkey? Total Destruction!!

On 27 June 2013 at 5:18 am Collin said:

Self managed KiwiSaver is only relevant to a small portion of total members. It is not new as both Craigs and Forsyth Barr have self managed options and client take-up has been low. In a Plan where most investors have asset allocations way out of line with their needs, promoting self managed KiwiSaver can only cause more harm than good.

On 28 June 2013 at 10:56 am Monkey with Machine Gun said:

Yes John Milner. You may remember that in 1999, Raven the chimp selected a portfolio (Monkeydex) using random darts. His returns beat "the best-of-the-best of all mutual funds run by America's top managers". Bring on self-directed. The sooner the better.

On 28 June 2013 at 3:27 pm MJP said:

SMSF growth in Australia has to be our guide and the growth since "little Johnnie" passed the legislation to allow them to invest directly into property and also lend against that property investment has been substantial. So it follows, that if SMSF's become "open", that even more investment into property will occur by Kiwi's as Gareth Morgan extols.

On 20 June 2014 at 3:19 pm Kiwi in Aussie said:

In Australia, direct investment holdings inside super provide substantial benefits to the member when it comes to the retirement phase.

Members are able to in specie a direct stock holding from their accumulation account to their pension account and pay no capital gains tax on this.

In contrast, members who allocate to a managed investment option have no control over the CGT liabilities of that option and the underlying fund(s).

The tax savings can therefore be substantial, and a member with $250k+ balance can diversify well and keep the AER below 1%, many in fact are below 0.25%. You don't need to create an SMSF to hold direct investments, several super funds provide members a facility to hold direct investments, and the fees to do this can be as low as $200 per annum.

With no capital gains tax in NZ the ability to in specie is a moot point, but I would agree there are capable DIY investors in NZ who, individually, or under guidance, could reduce their costs and still perform equal if not better than professionally managed funds.

Relative to the population however, the number of investors who would actually achieve this is small, and the question arises how best to ensure others who try will be guided appropriately.

There is no/little legislation that I'm aware of that exists in Australia around this at the moment, and anecdotally I've seen/heard of many punters who blow up their super accounts getting into member directed investments.

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