Refinements to scheme windup provisions
Changes have been made to the KiwiSaver Act 2006 to refine the scheme windup provisions. Applies from 21 Dec onwards.
Sections 50(4), 51, 57, 59 and 173 of the KiwiSaver Act 2006
Changes have been made to the KiwiSaver Act 2006 to refine the scheme windup provisions.
The amendments clarify the date on which a member will be allocated to a new scheme, require scheme providers to supply a tax file number for transferring members, and stop the reissuing of KiwiSaver introductory information packs to existing members.
If a KiwiSaver scheme provider winds up its operation and the scheme ceases to exist, Inland Revenue manages the transfer of members to a new scheme.
Under the previous rules, Inland Revenue was required to reallocate a member to a new default scheme on the day it received notice of their current scheme's windup. The member was provisionally allocated to a new scheme for three months before final allocation. The intention was to ensure that members were transferred smoothly to a new scheme upon closure of their current scheme. However in practice the process meant that members could be transferred too early, if the actual date of windup was more than three months after the date the Commissioner received notification of the windup. The early transfers impinged on trustees' completion of their fiduciary obligations under their scheme trust deeds.
In addition the requirement for Inland Revenue to make a default reallocation applied even when the trustees of the winding-up scheme had members' approval to transfer them to a chosen scheme upon windup. The default allocation was unnecessary in these situations, as the member had already chosen to join a particular scheme.
Sections 50(4), 51(1) and 57 (1) of the KiwiSaver Act have been amended to allow a winding-up scheme to retain its members and their contributions until its date of closure. There is no longer a requirement to have a three-month provisional period. Instead, a final allocation will occur, to either a default scheme or the member's chosen scheme(s) on the later of the date on which:
- notification of windup is received by the Commissioner; or
- the scheme's winding up takes effect.
To ensure correct identification of members throughout the transfer process, section 173 (1)(b) of the KiwiSaver Act has been amended to require schemes that are winding up to supply members' tax file numbers to Inland Revenue.
Finally, a minor amendment to section 59(a) of the KiwiSaver Act removes the obligation on Inland Revenue to issue an introductory KiwiSaver information pack to existing members who are being transferred to a new scheme following a winding up of their old scheme. Instead Inland Revenue will continue to send a tailored letter to affected members advising them of the windup and any required actions.
The new rules apply from 21 December 2010.