Refinements to scheme wind-up provisions

(Clauses 94 to 99)

Summary of proposed amendments

If a KiwiSaver scheme provider winds up their operation and ceases to exist, Inland Revenue manages the transfer of members to a new scheme, following notification by the scheme trustees or the Government Actuary.

Several remedial amendments to the scheme wind-up provisions within the KiwiSaver Act 2006 will fine-tune the current provisions, ensuring they give full effect to the scheme wind-up policy intent. These amendments clarify the date a member is allocated to a new scheme, add a requirement for scheme providers to supply the IRD number (tax file number) they hold for transferring members, and remove the requirement to send additional information packs to existing members.

Application date

The new rules will apply from the date of enactment.

Key features

Allocation to a new scheme

Once scheme trustees resolve to wind up their scheme and nominate an effective date of closure, they have 14 days to lodge a copy of the notice with both the Government Actuary and the Commissioner of Inland Revenue.

Currently, section 50(3) of the KiwiSaver Act 2006 determines that when the Commissioner receives notice from a provider of the impending wind-up, the member must be default-allocated to another scheme as soon as practicable. Section 51(4)(b) determines that the final date of allocation to the new scheme should be three months after the date on which the notice was received.

These sections do not take into account the effective date of closure nominated by the winding-up scheme in the notice. This is likely to be the date that transfer of membership has been arranged for.

Having the final allocation set at three months after the date that notification was received can cause an early transfer of members. This affects the scheme provider’s obligations to continue to meet the provisions of their trust deed until the scheme is wound up.

To allow the winding up scheme to retain its members and their contributions until its date of closure, sections 50(4), 51(1) and 57(1) are being amended so that the allocation will occur on whichever is later, the date notification of wind-up is received or the date on which the winding up takes effect. It will no longer impose the requirement to have a three-month provisional period for these members.

Supply of tax file number

Within 14 days of the wind-up resolution being made, section 173(1) of the KiwiSaver Act 2006 requires the trustees of the winding-up scheme to supply the Commissioner of Inland Revenue, the names and addresses of the scheme members.

Inland Revenue uses this information to verify the identity of the member. To ensure more robust identification, an amendment is being made to section 173(1)(b) requiring trustees to also supply the tax file numbers that they hold for these members.

Issuing of information packs

A KiwiSaver information pack contains general introductory information explaining the savings initiative. It is primarily targeted at new or prospective members.

Section 59(a) currently provides that KiwiSaver information packs should be sent to members when their scheme is winding up, so that they are aware of the default allocation rules and how to access information about KiwiSaver schemes. Section 59(a) requires the packs to be sent to all members of the winding-up scheme including existing members who have already made an active choice about their new scheme. However, all of the members would have already received this information pack when they joined KiwiSaver. Members are therefore receiving unnecessary or duplicate information, which can be confusing and irrelevant to their current situation.

Additionally, Inland Revenue sends a letter to affected members advising them of the wind-up and the required actions. These letters are tailored to suit the member’s situation. For example, those who have not chosen a scheme are given information about the default allocation rules and how to access information about KiwiSaver schemes.

Section 59(a) will be amended to remove the requirement to send an information pack to members whose scheme is being wound up.