Finance Minister Bill English will discuss the portability of superannuation with his Australian counterpart Wayne Swan at their annual meeting on July 16, and the country could stand to gain a “considerable amount” of some $16.6 billion that’s held in “lost accounts” by Australian super schemes.
While the details are yet to be discussed, it is envisaged retirement savings with complying Australian super funds could only be transferred into KiwiSaver funds in New Zealand. Australia’s tax office last year estimated it had around $16.6 billion in superannuation accounts that it can’t account for, and English expects a “considerable amount of this money could belong to New Zealanders who have returned home.”
While there isn’t any data on how much money could potentially be repatriated to Australia, Craig Howie, a spokesman for the minister, said given KiwiSaver was a fairly new scheme and there are some 500,000 kiwis currently living across the Tasman New Zealand should enjoy a net gain.
New Zealand implemented the KiwiSaver scheme in 2007 and topped one million members long before the 2015 target date. The National-led government cut the minimum contribution rate to 2% of an employee’s wage when it came to power last year, a move lauded by ING as making the scheme more attractive. The Australian government passed legislation for compulsory super in 1992, lifting minimum contributions to 9% in 2002.
David Boyle, head of Kiwisaver distribution at ING, said New Zealand’s KiwiSaver funds should see “significant” gains from the move, with Australia’s scheme being embedded for some 17 years, but the “devil would be in the detail.”
“People will be quite motivated to repatriate funds to New Zealand, and the fund managers will of course be happy with that,” he said.
The government needs to take a “sensible” approach in organising any portability scheme, as the volume of paperwork will be very large.
An aging population is becoming a major issue for the global economy, and in its May Budget, New Zealand’s government suspended contributions to the Superannuation Fund, a separate fund to KiwiSaver, set up to help meet future payments to government pensions. Meanwhile, the Labor-led Australian government passed laws to lift the pension eligibility age to 67 by 2023.