Government Actuary KiwiSaver Issues Q&A
[ Last Updated 9 March 2007 ]
Trust Deed Requirements
1. What is the Government Actuary's view on the requirements contained in section 66 of the KiwiSaver Act 2006?
Answer: We note that section 66 of the KiwiSaver Act 2006 ("the Act") requires that employer contributions that count towards the member's nominated contribution rate of either 4% or 8% (refer section 64) vest immediately in the member. The member can determine the amount of the employer contribution that will count towards the 4% or 8% rate.
Section 66(b)(ii) requires the trust deed of the KiwiSaver scheme to specify that contributions paid by the employer which make up the required 4% or 8% as nominated by the member are completely vested immediately after they are made. Also from an administration perspective section 66 has a direct consequence on the application of section 101(2) of the Act.
2. Does the Government Actuary have a view on payments of insurance premiums?
Answer: Section 68 (2) requires payment of "other things" like insurance premiums to be paid in addition to the members chosen 4% or 8%.
3. Can the trust deed of a KiwiSaver Scheme contain provisions which technically breach the legislation but for the fact that they are prefaced with a phrase like "Subject to the Act…"
Answer: The trust deed of a KiwiSaver Scheme must comply with the law as it is and state the scheme and benefits in accordance with current law, and a trust deed which states a different position and relies on the Act and Rules to restrict its immediate application does not comply with that requirement. Your attention is also drawn to the trustee/solicitor certificate required as part of the registration process.
Exempt Employers Applications
1. Can a provider design its own template exemption application form?
Yes, Please note the requirements of regulation 5 of the KiwiSaver regulations 2006.
2. Many plans include a leaving service term which specifies that the member receives 0% of the Employer Account on dismissal or resignation to avoid dismissal. Would a term of this nature mean that a plan would fail to meet to test to be applied for exemption?
Yes, the scheme would fail this requirement if vesting under s26 is required to meet the minimum contribution rate.
Sections 9BAA and 9BAB Superannuation Schemes Act
1. What guidance does the Government Actuary have on the tests that will apply to determine what is an "adverse affect" on members, and what is "material" when determining whether to approve a transfer without requiring member and beneficiary consent?
Comment: Transfers will be considered on a case by case basis. The Government Actuary is required to consider all aspects, including benefit designs, fees, investment offerings etc.
2. Under section 9BAA could the Government Actuary require an employer to obtain consent to transfer from specific members of the plan only, rather than referring the transfer for full consent under s9B. Does the Government Actuary agree?
Agree but note the requirements of section 9BAA(3)
3. What documentation will the Government Actuary require the employer and scheme provider to provide to enable transfers under these sections in the period before 1 July?
Comment: Existing trust deed/participation agreement
An analysis of the two scheme designs and draft of proposed new participation agreement and benefit schedule. Also see Newsletter 60. GA expects to receive sign off from Trustees of New Scheme that in their view there are no adverse effects with reasons.
Transfers/Conversions from a Registered Superannuation Scheme to a KiwiSaver Scheme
1. Where a registered superannuation scheme includes vesting or access/withdrawal provisions that are more favourable than would be available under a KiwiSaver scheme, does the Government Actuary have a view on the ability to use s9BAA in these circumstances?
Answer: Government Actuary cannot give consent to transfer from a registered scheme to a KiwiSaver scheme because you would be locking in the transfer values and also future contribution streams.
2. Does the Government Actuary have any view on the ability of employers to lock in member contributions under a KiwiSaver scheme (or a complying superannuation fund scheme) on a future contributions basis only? Transfer/conversion requirements do not appear to have an express exemption from the requirements of s9 of the Superannuation Schemes Act. For example, what ability will employers have to lock in member contributions under a KiwiSaver scheme (or complying superannuation fund scheme) on a future contributions basis only?
Answer: Given the change to a material term of the investment offering we suggest you can't lock in future contributions without members consent. Suggest you could consider setting up a new category for a complying super fund status which members could elect to join.
Applications for Complying Superannuation Funds
1. In assessing an application under s35 of the Superannuation Schemes Act, will the Government Actuary's decision be influenced by who ultimately receives the benefit of the SSCWT exemption - the employer or the member?
Answer: Government Actuary is not required to consider who benefits from the SSCWT. But I suggest that a member cannot be compelled to be a member of that locked in category.
2. Will the Government Actuary accept one package of documentation to cover both the application from the KiwiSaver requirements under s25 KiwiSaver Act and the application under s35 Superannuation Schemes Act. Given that the tax requirements have to be met by 1 July, does the Government Actuary have any guidance for us to streamline processes and minimising documentation?
Answer: No problem to receive one package Applications from schemes in force prior to 1 July 2007 are not required to be lodged before this date. That is only the earliest date a member/ employer can benefit from the tax change.
Administration of KiwiSaver Schemes
1. Does the Employer have to inform the Government Actuary when they select a preferred provider?
Answer: The employer is not required to advise the Government Actuary.
2. The Government Actuary's newsletter no. 60 refers to "market best practice" being that participation agreements between employers and providers will be executed. Does the Government Actuary have any view on basic requirements that must be included in participation agreements, or do Trustees have sole discretion to determine content?
Comment: The Government Actuary would expect the participation agreement to spell out the member and employer contribution requirements and tailored benefit design including any vesting.
3. KiwiSaver Act prevents any person who charges a fee for services in relation to provision of a KiwiSaver scheme from charging "unreasonable fees". Will it be acceptable for advisers to charge an advice fee for services provided to members of a KiwiSaver scheme? We would anticipate two types of fee for advice being charged on a KiwiSaver scheme:
- a fee based on assets under management under the KiwiSaver plan, which will be paid from the members' Employer Accounts
- a fee for specific financial planning services provided to individual members, which would be paid from the member's Member Account.
Answer: Any KiwiSaver fees must meet the requirements of Rule 2 of Schedule 1 and be included in the investment statement. Attention should be given to whether the fee matches the service provided. We do not believe that it is appropriate for such a service fee to be deducted directly from members accounts. We also do not consider the provision of financial planning services can fit Rule 2 (1). Any such fees will have to be disclosed in investment statements and will be taken into account when considering registration, see para9 of Schedule 2 Part 1
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