All investments carry risk. Events affecting investments cannot always be foreseen, and no-one guarantees any rate of return (or the return of capital). Before joining the Scheme, you should carefully consider the risks. Your financial adviser can explain the risks in more detail, and tailor advice to suit your needs and objectives.
Investments are often divided into five major investment classes – cash, bonds, property, shares and alternative assets – which have differing levels of risk. There is generally a risk/return trade-off. This means that, when investing in higher risk investments, a higher return is expected on those investments to compensate for the additional risk. Lower risk investments are expected to generate a lower return on average over time.
Determining how much risk to take should be related to the period of investment. Generally, if investing for a longer period of time, a portfolio should hold more growth assets (such as shares and property). Returns are expected to be higher and there is a longer time period in which to balance out any negative returns received against positive returns. Lower risk investments are generally more suitable for someone with a shorter time horizon, as these investors require greater stability in returns with less risk of loss of capital.
To help you clarify your own attitude to risk, we recommend you seek financial advice from an authorised financial advisor. In addition, you may work out your risk profile at https://sorted.org.nz/tools/investor-kickstarter
See the Product Disclosure Statement (PDS) and Investment Options Supplement (IOS) for more information about the risks associated with investing in an investment portfolio.
There are fees applicable for investing in the Scheme, which are deducted from your investment. The fees you pay will be charged as follows:
Information on the fees for the Personal Plans can be found in the investment options supplement and at www.business.govt.nz/disclose.
Information on the fees actually charged during the most recent year will be provided in the personalised quarterly report given to each Member.
Members are not personally liable for New Zealand income tax on their investment returns or withdrawals from the Scheme. Because the Scheme is not a Portfolio Investment Entity, it pays tax at the Scheme level at 28% on its net assessable income. This means that the Scheme calculates the amount of its assessable income each year and arranges for this tax to be paid out of Members’ funds.
Each member’s share of the Scheme’s overall tax position is calculated based on the member’s transactions during a particular tax year, which runs to 31 March. This can result in some members being in a notional tax payable position and other members being in a notional tax refund or loss position.
Tax can have significant consequences for investments. If you have any queries relating to the tax, you should obtain professional advice.
Where funds are received by the scheme that have had UK tax relief, the UK may levy charges that are similar to taxes in certain circumstances. These include a change of residence within five years or a transfer to another scheme established in another country or which is not a QROPS.
The i-Select Superannuation Scheme is a QROPS. This means you may be able to transfer UK pension funds to the Scheme e.g. from a registered pension scheme in the UK or from another QROPS.
UK pension funds that are transferred to the Scheme will be subject to current QROPS rules and restrictions. We recommend you obtain advice on these before you make a transfer to the scheme.
The Scheme can accept members who are not residents in New Zealand, but there may be specific disadvantages following the introduction of the Overseas Transfer Charge by the UK government with effect from 9 March 2017. It is possible but unlikely that a non-resident would qualify for any of the exemptions from this charge at present.
Funds transferred out of the UK before 9 March 2017 are likely to be unaffected by the introduction of the Overseas Transfer Charge.
The Manager has registered the scheme with ASIC (the Australian Securities and Investments Commission) under the mutual recognition scheme related to the offering of financial products in both countries.
There may be tax advantages to Australians investing in New Zealand superannuation schemes because of the Australian superannuation contribution rules.
We strongly recommend you seek advice from an appropriately qualified and experienced superannuation and taxation adviser before joining or making a transfer to the Scheme.