Kiwis stand to benefit from super portability

MEDIA RELEASE

3 July 2013

Kiwis stand to benefit from super portability

New Zealanders have most to gain from new arrangements that allow Kiwis and Australians to take their superannuation contributions with them when they move between the two countries, says a Victoria University finance expert.

Trans-Tasman super portability came into effect on 1 July, meaning Kiwis can bring home their Australia superannuation payments and put them into KiwiSaver, instead of having them locked in to an Australian super scheme until retirement.

Professor Norman Gemmell, who holds the Chair in Public Finance at Victoria University, says the scheme is likely to benefit New Zealanders more than Australians.

“There are greater numbers of Kiwis working long-term in Australia and the Australian government contributes comparatively more in subsidies to retirement savings for those working in Australia than the New Zealand government does for its workers,” says Professor Gemmell.

But while super portability will help Kiwis to retire back home, says Professor Gemmell, it won’t solve the different, but serious, labour market problem of recruiting older Australians to jobs in New Zealand.

“Australians aged say 55 who come to work in New Zealand are often reluctant to give up their Australian super contributions while they are here because they want to keep growing the pot back home, ready for a return to Australia when they retire.”

Overall, says Professor Gemmell, the ability to take pension contributions with you when you move will make it more financially attractive to work in the “other” country.

“Greater portability is a good idea because people around the world, and Kiwis in particular, are becoming more internationally mobile.

“However, while Kiwis are highly mobile to other countries, as well as Australia, don’t expect agreements with other major destination countries, like the United Kingdom and the United States, any time soon.”

Professor Gemmell says there is a strong case for New Zealand and Australia to follow super portability with mutual recognition of each country’s imputation credits, something the Australian government has so far refused to support.

Imputation credits are offered to shareholders for taxes paid at the company level on their dividends.

“Investment is highly mobile across the Tasman making it desirable to have mutual recognition of both superannuation contributions and imputation credits.”

ENDS

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