It pays to check your Super

A couple’s windfall is a reminder to make sure you’re on the right tax code

Q: I always read your column in Saturday’s Herald. When you recently published the NZ Superannuation amounts I realised that my husband and I were not being paid the correct amount.

I phoned Work and Income and the IRD and found out that we had not changed our tax code when we retired. We got a refund of over $3000 each. A big THANK YOU!

A: That’s wonderful news. Your letter got me wondering how many other readers might be receiving less NZ Super than they are entitled to.

So here’s a list — with help from the Ministry of Social Development and Inland Revenue — of how much most people on NZ Super should receive in their bank accounts each fortnight.

A single person living alone gets $981.46 before tax. After tax it’s:

● $847.66 if NZ Super is your only income, or you get more from NZ Super than from wages or salary.

● $809.96 if you get less from NZ Super than from wages or salary, and your total income from NZ Super and wages and salaries is less than $48,000.

● $687.46 if that total is $48,001 to $70,000.

● $658.06 if that total is more than $70,000.

For a couple who both qualify, each person gets $744.54 before tax. After tax it’s:

● $652.04 if NZ Super is that person’s only income, or they get more from NZ Super than from wages or salary.

● $614.34 if that person gets less from NZ Super than from wages or salary, and their total income from NZ Super and wages and salaries is less than $48,000.

● $521.34 if that total is $48,001 to $70,000

● $499.02 if that total is more than $70,000.

From May 1 to October 1, superannuitants also get the winter energy payment, which was doubled this year because of Covid-19. Singles get $81.82 a fortnight and couples or people caring for children get $127.28. Note that this will be ending in a couple of weeks.

What if you’re in another situation, such as a single person sharing accommodation or a person in a partnership with a non-qualified partner included in their NZ Super? You can find out which tax code applies to you at tinyurl.com/ NZSuperTax. Then go to tinyurl.com/ NZSuperAmount to find out the amount that should be coming into your bank account.

If you find you are receiving the wrong amount, or if your income changes, you “need to advise MSD and complete an IR330 tax code notification”, says an Inland Revenue spokesperson.

She adds, “Of course, some superannuitants may also have other deductions such as student loans (if they meet the threshold), and that would need to be taken into account.”

Let’s hear from anyone else who discovers they also have a few thousand dollars coming to them!

Along those lines, see today’s third Q&A — another happy one.

Tax-free KiwiSaver

Q: Are withdrawals from your KiwiSaver taxable, and added to your NZ Super as income, increasing your tax rate?

A: No. There’s no tax on the money you take out of KiwiSaver.

You’ve already paid tax on the earnings — usually interest and dividends — within your KiwiSaver fund. Your provider takes care of that. So withdrawing money is just like taking it out of a bank account, as far as tax is concerned.

Compound payoff

Q: Great response re compound interest in your last column.

In my younger days I paid into a mutual fund. After my marriage split, I could no longer afford payments and forgot about the fund, which at that stage had accumulated to $17,000.

After 25 years the fund tracked me down. I thought my $17,000 would have been whittled away by fees, so imagine my surprise and delight to find it had accumulated to $45,000 with no input from me. Compound interest is indeed a wonderful thing.

A: It certainly is when you’re saving. It’s not so good when you’re borrowing — as people struggling to pay their debts will have noticed.

But in your case it’s all positive. At the risk of being a wet blanket, I feel I should point out that your investment has not made huge returns. The “return on investment calculator” on calculator.net tells us you got just under 4 per cent a year after fees and tax.

Still, some of those decades-old investments charged horribly high fees, so you did pretty well. Getting $45,000 out of the blue must have been a lovely surprise.

Offset mortgages

Q: I have been reading a number of articles lately on the advantages of offset mortgages. I have contacted my bank ANZ numerous times to be told that it isn’t a product they offer in New Zealand. However, they suggest I set up a flexi account as an alternative.

This seems to be the same problem you wrote about on 17 December 2016, with ASB and ANZ providing the following. ANZ: “We constantly review our products in light of market conditions. We have no immediate plans to offer offset mortgages, but we are aiming to deliver enhancements in the near future to support our home lending customers.” ASB: “ASB has no plans to introduce an offset mortgage in the short term. Customer feedback continues to indicate that our revolving credit home loan products (Orbit, Orbit Fast Track) meet the majority of needs of those looking for an offset mortgage.”

It seems to me that there have been no enhancements in this area to support home lending customers, whereas Kiwibank, Westpac and BNZ seem to offer an offset product with no problem.

Without changing banks is there some way to operate an offset account?

A: It seems not.

With all the types of mortgages mentioned, the borrower reduces their mortgage debt by amounts they have in the bank. That means they pay less interest.

But with an offset loan you can include family bank accounts — although those accounts earn no interest. And some people find it easier to manage their money than with, say, a revolving credit mortgage.

Back in that 2016 column I said, “customers who would like the offset option should keep asking. That’s how things get changed.” But there have been no changes, at least so far, at ASB or ANZ.

Says ANZ: “We acknowledge that some home loan customers in the New Zealand market utilise an offset mortgage, but it’s not in our immediate plans given a number of other priorities, which have increased in the current environment.” And from ASB:

“Currently, we have no plans in the short term to introduce an offset mortgage product. ASB’s revolving credit home loan products can meet the majority of needs that customers look for in an offset mortgage, including using credit funds against their home lending to reduce interest costs and help pay down the loan faster, and allowing redraw of those funds when needed.”

Bonus Bonds #1

Q: My four children have funds in Bonus Bonds; small amounts (less than $1000).

ANZ have our mailing address but the children live overseas and cannot provide an NZ bank account number. Their prizes (occasionally $20) are automatically reinvested.

How do they retrieve their funds, which were often gifts from their grandparents (now deceased)? They have not seen the need to go onto MyBonusBonds as they used the reinvestment option for any prizes.

Please advise the best way for them to get their money.

A: An ANZ spokesperson points out that they have information on their website for overseas customers.

It includes, “If you do not have MyBonusBonds you can have the proceeds deposited to any NZ account, or sent to an overseas bank account.” It then tells you how. There’s a $28 fee plus possibly other fees.

The spokesperson adds, “With regards to the issue of a customer with a low balance who doesn’t have NZ accounts and doesn’t wish to remit the funds overseas, they can pay the funds to someone with a NZ bank account (e.g. the mother in this case).

“Another option for overseas customers needing to close accounts but having balances less than the cost to transfer — or anyone for that matter — is to donate their balance to the Cancer Society, which ANZ supports. Customers just need to give us a written instruction and we can make the payment on their behalf.” That might be a good option for many with small amounts in Bonus Bonds.

Bonus Bonds #2

Q: It is disappointing that ANZ can’t give some idea or range of likely returns for those investors who stay in Bonus Bonds to the end. I am hopeful that the FMA will insist that ANZ do a better job of providing information on this.

A: Says a Financial Markets Authority (FMA) spokesperson, “We note that ANZ has a list of FAQs on its website regarding Bonus Bonds.” That includes this: “As we currently have more than $1 of assets for every Bonus Bond issued there is a reasonable chance that people will receive slightly more than $1 per unit in a wind up, however do note while we don’t expect to pay less than $1 per Bonus Bond it is possible that the price could be slightly less than $1.” That gives you a pretty good idea.

The FMA spokesperson continues, “ANZ has indicated that the final payout will depend on a number of uncertain factors, such as the realised value of the investments, the cost of winding down the scheme and the number of bond holders who decide to redeem their bonds prior to windup.

“The audited financial statements of the scheme are due by the end of September, which will provide bond holders with more information regarding the value of the reserves.” He adds that ANZ has been keeping the FMA informed over its Bonus Bonds decision. “ANZ has assured us that customers’ interests have been foremost in its decision making.

“We have asked ANZ to consider the impact of closure of the scheme in the current environment, particularly as this relates to potentially vulnerable customers, and those who may require support to identify suitable alternative use for their funds when their Bonus Bonds are redeemed.”

During the FMA’s conduct and culture reviews of New Zealand’s banks, “we raised the issue of legacy products that are potentially low value for customers and asked all providers to review legacy products with that in mind. We understand ANZ’s decision regarding Bonus Bonds is not directly linked to current legacy product reviews.”

He concludes, “We will continue to monitor progress and engage with ANZ and its supervisor as the wind-up progresses.”

Bonus Bonds #3

Q: For those of us that have managed our exposure to Bonus Bonds to ensure a reasonable return (winning on average at least one prize a month), is there anything preventing another funds manager from developing and offering a similar product, albeit preferably with lower fees?

A: Don’t hold your breath. “Bonus Bonds had certain exemptions that allowed it to operate within the current regulatory regime (FMC Act),” says the FMA spokesperson.

“The FMA has not performed an analysis as to whether a similar scheme could be launched under the current regime. However, such a proposition would face the same economic circumstances (i.e. low interest rates) and lack Bonus Bonds’ benefits of scale.” Next week we’ll look into what you might do with your Bonus Bonds money.

Mary Holm, ONZM, is a freelance

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journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.

There’s no tax on the money you take out of KiwiSaver . . . So withdrawing money is just like taking it out of a bank account, as far as tax is concerned.