Trans-Tasman retirement savings portability
Hon Dr Michael Cullen
Minister of Finance
17 July 2008 Media Statement
Agreement expected on trans-Tasman retirement savings portability by end of October
Officials from Australia and New Zealand will finalise the text of a deal by the end of October that will facilitate the portability of private retirement savings across the Tasman, Australian Treasurer Wayne Swan and New Zealand Finance Minister Michael Cullen said at the conclusion of their first formal bilateral talks, which were held at Parliament in Wellington today.
“At our meeting today we surveyed the good progress that senior officials from the two countries have made on the design of some practical options for improving the portability of savings between Australian and New Zealand retirement savings schemes”.
“We are now confident that KiwiSaver and complying Australian superannuation accounts are mutually compatible and that outstanding policy issues can be addressed in time for a Memorandum of Understanding to be ready for signing by the end of October,” the Ministers said.
The basic framework has been agreed, but officials, in conjuction with local financial services industries, still need to design the domestic arrangements in either country.
Progress on the issue would mark another important step forward in efforts to facilitate the free-flow of people between Australia and New Zealand.
“Both governments are committed to all measures that make the Australasian economy a more competitive place in which to work, invest and to do business, and we are delighted that we have been able to make such quick progress in this area,” the Ministers said.
Further background information for reporters that seek some more context
The New Zealand and Australian labour, financial, and goods and services markets are highly integrated by international standards and the Single Economic Market (SEM) policy agenda builds on the open trading environment created by the Closer Economic Relations (CER) and related agreements.
The SEM agenda aims to improve the operation of trans-Tasman markets by addressing behind-the-border impediments to trade and the free movement of people.
The introduction of the New Zealand KiwiSaver scheme in July 2007 presented an opportunity for both countries to explore the potential for further retirement savings integration. Improved savings portability is expected to reduce impediments to trans-Tasman labour market mobility.
Currently, personal retirement savings accumulated in Australia cannot be taken to New Zealand before retirement is reached. This restriction was historically attributable to both an automatic ability of New Zealanders to retire in Australia and the absence of a retirement savings scheme in New Zealand with equivalent preservation requirements.
The inability of individuals to streamline and consolidate their personal retirement savings has potentially inhibited the free flow of workers between the two countries and some individuals may have historically ended up paying multiple fees for the administration of their savings accounts.
The Working Group, which was established to examine this issue following the meeting between the New Zealand Minister of Finance and the former Australian Treasurer on 29 January 2007, recently reported its recommendations to Ministers.
Ministers agreed that all retirement savings transferred between the two countries, via the new portability regime, would be ring-fenced within domestic pension funds and tagged as being sourced from their country of origin. Ring-fencing administratively separates funds in order to allow country specific rules to be applied. For example, savings originating from Australia and transferred to a New Zealand KiwiSaver account will be tagged as being “Australian-sourced”.
Country specific requirements will be designed to address policy differentials between the two countries. Differences in preservation requirements were given special attention. For example, Australian funds will not be able to be used to purchase a first home as this KiwiSaver provision is not allowed under current Australian legislation.
The specific details design of domestic arrangements still needs to be finalised. Officials will engage with local industry in the next couple of months to ensure that compliance costs are kept to a minimum