Sponsored schemes risk becoming thing of the past
Employer-sponsored superannuation schemes are basically a sunset industry, according to Aon Consulting New Zealand actuary Greg Lee, unless there is some dramatic change.
Compliance with the requirement for such schemes to have a prospectus and investment statement if they have assets of more than $5 million have pushed the movement from standalone schemes to "master trusts." These have one trust deed that allows many different employers to operate superannuation arrangements on a combined basis but allows them to design their own separate and distinct benefit structures.
There is a corporate trustee, so no individual trustees are required for the plan, avoiding the onerous liabilities placed on people acting as trustees. Master trusts are growing much faster than corporate superannuation schemes, which are actually in decline.
Aon noted the Securities Commission was looking at the question of prospectus and investment statement requirements, in light of their expense and few employees being bothered to ask for the information and/or study it.
Securities Commission chairman Euan Abernethy said the commission had taken a "watchdog brief" on the topic for some time as part of an overall review of regulatory requirements. Any recommendation was "some time off" even if a recommendation was to be made.
Employer-based superannuation schemes have also been involved in a proposed change to taxation, set out in the extraordinarily-named Taxation (FBT, SSCWT and Remedial Matters) Bill, now before a select committee. SSCWT stands for superannuation scheme contribution tax and is designed to prevent superannuation schemes being used as tax avoidance schemes under the new 39c taxation regime for people with taxable income of more than $60,000.
The situation arose because the investment income in superannuation funds is taxed as 33c in the dollar, the same rate as the former level of maximum tax on individual incomes. A provision in the bill sets a 5% withdrawal tax on the employer-contributed part of a member's repayment on the latter's withdrawal from a scheme.
If finalised in legislation, the tax will become effective from April 1 this year. It applies to all new members in the schemes from that date and also to resignation benefits if the individual has been in the scheme for less than two years and also if contributions have increased more than 50% in the two years before withdrawal.
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