What is KiwiSaver?
KiwiSaver is a Government-led initiative to encourage New Zealanders to save for their retirement. New Zealanders who save through a KiwiSaver scheme receive valuable savings incentives.
Why has the BCF KiwiSaver Scheme been established?
The BCF KiwiSaver Scheme (the BCF Scheme) has been established to provide members of the Brethren Christian Fellowship with access to KiwiSaver benefits. Until the BCF Scheme was established in April 2011, KiwiSaver participation was not viable for the Brethren community, because joining KiwiSaver would have involved Brethren members’ money being pooled with money held for persons not in fellowship.
Who can join?
Only members of the Brethren community can join the BCF Scheme. Ordinarily, you must also be aged under 65, living in New Zealand and entitled to permanent residence in New Zealand.
What are the benefits offered to members of the BCF KiwiSaver Scheme?
Under legislation and Government policy applying as at August 2015 (both of which are subject to change) the key KiwiSaver savings incentives are as follows:
Ongoing Government contributions: If you are aged between 18 and 64 (or you have reached age 65 but still have fewer than 5 years’ KiwiSaver membership) then, while you reside mainly in New Zealand and contribute to the BCF Scheme, you will be eligible for annual contributions to the BCF Scheme from the Government, at the rate of 50 cents for every dollar that you contribute, up to a maximum Government contribution of $521.43 per year (which equals about $10 a week) per full year of membership.
Compulsory employer contributions: If you are employed and aged between 18 and 64 (or you have reached age 65 but still have fewer than 5 years’ KiwiSaver membership) then, while you contribute to the BCF Scheme from your pay, your employer must also contribute to the Scheme for your benefit (on top of your pay, unless you have agreed otherwise) at the rate of 3% of your salary or wages.
Additionally, a KiwiSaver HomeStart Grant of:
- $1,000 for each year of KiwiSaver contributions (maximum $5,000) if you are buying an existing home, or
- $2,000 for each year of KiwiSaver contributions (maximum $10,000) if you are buying or building a new home,
may be available you if you qualify for a home purchase withdrawal, have been making regular KiwiSaver contributions for at least 3 years and meet all the other qualifying criteria (see www.hnzc.co.nz). If both you and your husband or wife are in the BCF Scheme, each of you may qualify to make a withdrawal and to receive a KiwiSaver HomeStart Grant to help you buy or build your first home. This benefit is subject to income and purchase price limits and other qualifying criteria. The KiwiSaver HomeStart Grant (if you qualify) is separate from, and payable in addition to, any first home purchase withdrawal you may be eligible to make from the BCF Scheme.
Are the contributions I receive from my employer taxed?
Employer contributions are subject to a withholding tax called employer’s superannuation contribution tax (ESCT). ESCT is deducted from your employer’s contributions before the money goes into your account. ESCT is usually the same as your marginal tax rate (and current ESCT rates are set out in the BCF Scheme’s Investment Statement).
Can I see some worked examples of what contributions might be paid for my benefit?
Example 1: Employee
A earns $52,000 a year and started contributing to the BCF Scheme on 1 July 2013 at the minimum contribution rate of 3% of pay (just under $30 a week). A’s employer contributes to the BCF Scheme for A’s benefit on the same basis. This example assumes ESCT is deducted from the employer’s contributions at the rate of 17.5%. This is what the contributions made to the BCF Scheme for A’s benefit could total after 3 years:
|Compulsory employer contributions||Government contributions||Total|
Example 2: Non-employee
B is not employed (i.e. not receiving salary or wages) and makes direct credit contributions to the BCF Scheme at the rate of $20 a week. This is what the contributions made to the BCF Scheme for B’s benefit could total after 3 years:
|Compulsory employer contributions||Government contributions||Total|
- Each table is based on the KiwiSaver legislation and Government policy applying as at August 2015. Legislation and policy are both subject to change.
- Conditions apply to receiving government contributions, and not all members will qualify. A and B are both assumed to be aged between 18 and 64 and continuously NZ resident.
- Each table shows only contributions (assuming no suspension of the member’s contributions). It does not take into account investment returns (positive or negative), fees, charges, or inflation.
How will my money be invested?
All the money in the BCF Scheme is currently (i.e. as at February 2016) invested in bank deposits. Once the Scheme’s assets have reached a sufficient size (as determined by the Trustee) it is proposed that its investments will be diversified into other investment types.
The Trustee expects that these other investment types will initially be New Zealand bonds (“bonds” are loans to governments and other organisations, in return for which borrowers generally pay agreed interest for an agreed period).
Bank deposits and bonds are traditionally regarded as conservative investments, because they have lower expected risk but are likely to produce lower returns over time than growth assets such as shares and property.
The Trustee currently intends that in due course (i.e. when the BCF Scheme is large enough as determined by the Trustee) Scheme assets will be invested, subject to legislation, in one or more of the following:
- deposits with non-bank deposit takers;
- Brethren-owned businesses;
- residential mortgages for Brethren members; and
- commercial property to lease to Brethren.
The Trustee may later choose to introduce a member investment choice facility. In that case there will likely be a conservative option weighted towards bank deposits and bonds.
In determining its investment strategy from time to time, the Trustee will be assisted by an independent investment consultant (Melville Jessup Weaver).
When can I get my money out?
The KiwiSaver Scheme Rules currently allow withdrawals to be made from the BCF Scheme in the following circumstances:
- Reaching your “Qualifying Date”: This is generally when you qualify for New Zealand Superannuation (currently at age 65). However, if you join aged 60 or more, your Qualifying Date is when you complete 5 years’ membership. You will be able to withdraw some or all of your BCF Scheme balance at any time after you reach your Qualifying Date.
- Purchasing a home: You will be able to make a withdrawal from the BCF Scheme to help purchase your first home if you intend it to be your main residence and you have saved through KiwiSaver for 3 or more years. If you have owned a home before, you may still be able to make a home purchase withdrawal if you provide the Trustee with written confirmation from Housing New Zealand stating that it is satisfied that your financial position is the same as would be expected of a person who has never owned a home. After the withdrawal, you must leave a minimum of $1,000 in your BCF Scheme account (as well as any amount you may have transferred from an Australian Scheme).
- Permanently emigrating: One year after permanently emigrating from New Zealand to any country except Australia, you can withdraw your BCF Scheme balance (excluding all Government contributions other than the $1,000 ‘kickstart’ you may have received – these must, in that case, be repaid to Inland Revenue).
- If you permanently emigrate to Australia then:
– you cannot make a cash withdrawal; but
– you can choose between remaining in the BCF Scheme and transferring your entire balance, including all Government contributions, to an approved Australian scheme
- Significant financial hardship: In certain circumstances (prescribed in the KiwiSaver Scheme Rules), you will be able to make a partial withdrawal from the BCF Scheme if we are satisfied that you are suffering (or likely to suffer) from significant financial hardship. We must be reasonably satisfied that you have explored and exhausted reasonable alternative sources of funding.
- Serious illness: You will be able to make a full withdrawal from the BCF Scheme if we are reasonably satisfied that you are suffering from an injury, illness or disability:
– making you totally and permanently unable to engage in work for which you are suited by reason of experience, education or training; or
– that poses a serious and imminent risk of death.
- Death: If you die then your full balance will be paid to the executors or administrators of your estate on request (unless it is less than a prescribed amount – currently $15,000 – and certain other conditions are met, in which case it may be paid direct to a surviving spouse or caregiver).
- Withdrawals required by other legislation: We must comply with any legislation or court order requiring us to release any of your funds from the BCF Scheme.
Who is involved in providing the BCF Scheme?
The Trustee of the BCF Scheme is Arotahi Trust Limited, which was established for the sole purpose of acting as Scheme Trustee. The Trustee holds all Scheme assets for the members’ benefit and is responsible for ensuring that the BCF Scheme is administered in accordance with its Trust Deed and all applicable laws.
The Trustee has delegated the performance of Scheme administration functions to an Administration Manager, Melville Jessup Weaver (MJW). MJW’s role includes establishing and maintaining members’ accounts, processing contributions, responding to member enquiries and calculating and paying benefits.
The Promoters of the BCF Scheme are BCF Limited and its directors. BCF Limited was established for the sole purpose of promoting offers to join the BCF Scheme and its directors have planned this offer of Scheme membership.
How much do I have to contribute?
Under legislation applying as at February 2016, if you are an employee you must contribute at the minimum rate of 3% of your gross salary or wages. You can elect a higher contribution rate of 4% or 8%. If you are self-employed or not employed (and aged 18 or more) then to open a BCF Scheme account you must:
- Complete a Direct Debit Authority to make a regular contribution of at least $20 per month; or
- If you are unable, or do not wish, to commence a direct credit at this time, make an initial deposit of $100 (by cheque made out to “BCF KiwiSaver Scheme”).
If you are aged under 18, no contributions are required in order to join the BCF Scheme (unless you are employed and paying income tax), but:
- Some form of contribution is necessary in order to meet administration fees; and
- We can close a member’s BCF Scheme Account if it has a nil balance.
Can I stop contributing?
If you are self-employed or not employed, you can stop (and resume) contributing at any time. If you are employed, you can take a “contributions holiday” (i.e. suspend your contributions) after contributing for 12 or more months, or if you are suffering financial hardship. A contributions holiday can be for any period between 3 months and 5 years. You will need to resume contributing at the end of the holiday unless you apply for a further holiday. There is no limit to the number of times you can take a contributions holiday.
What if I am already a KiwiSaver scheme member?
The KiwiSaver Act allows you to elect to transfer to the BCF Scheme so long as you meet the eligibility requirements (and to transfer, you don’t have to be aged below 65). As you can only be a member of one KiwiSaver scheme at a time, if you choose to transfer then you must transfer your entire KiwiSaver account balance to the BCF Scheme (and you will then no longer be a member of your existing scheme). Your existing KiwiSaver scheme may charge you a transfer fee.
Is there any risk that I could lose money in the BCF Scheme?
Risk is inherent in all investments. None of the Trustee (Arotahi Trust Limited), the Promoter (BCF Limited), the Government or anyone else guarantees that you will receive back the money invested for you in the BCF Scheme and there is no guarantee or promise of any particular rate of return on your investment.
Because your returns will be linked to the amounts in your BCF Scheme accounts when you receive benefit payments, and because those accounts will have earnings allocated to them at rates determined by the Trustee (and be debited with expenses and possibly investment losses) there is a risk that you will not fully recover the contributions made to the Scheme for your benefit. Possible reasons for this include those set out at pages 22 to 24 of the Investment Statement.
Under current law while you are aged 18 or more and you qualify:
- The first $1,042 a year of your own contributions will entitle you to Government contributions at the rate of 50 cents per dollar of your contributions, up to a maximum Government contribution of $521.43 per full year of KiwiSaver membership; and
- Your employer (if any) must contribute at the current before tax rate of 3% of your salary or wages.
These incentives minimise the risk of you receiving less than your own contributions.
What will happen if I leave the Brethren community?
If you cease to break bread with the Brethren Christian Fellowship then we can transfer your BCF Scheme balance to a “Segregated Pool” in the Scheme, where it will be held separately from the assets held for other members (in the “Main Pool”). If we determine that you have ceased to break bread with the Fellowship then we must notify you of an intended transfer to the Segregated Pool, the implications of that transfer and your right to transfer to any other publicly offered KiwiSaver scheme.
The Segregated Pool (if required) will be held solely in bank deposits.
What are the charges?
The Administration Manager will deduct a monthly management fee from your balance. This fee will be based on the number of BCF Scheme members from time to time, reducing as numbers increase (see page 13 of the Investment Statement) and is currently $4.17 per member per month (subject to an overall minimum fee of $30,000 per calendar year). The fee will increase each year in line with CPI.
The Administration Manager can also be reimbursed for expenses reasonably incurred in providing its services to the BCF Scheme (and may be paid on a time cost basis for producing any special purpose information or giving consulting advice).
The Trustee does not charge any fees for its services, but seeks reimbursement from BCF Scheme assets for the expenses (such as legal and audit fees and investment costs) and liabilities which it incurs from time to time in acting as Trustee. The Trustee is also gradually recovering from BCF Scheme assets, by instalments over time, certain costs incurred in connection with the formation of the BCF Scheme. All KiwiSaver scheme fees are subject to “reasonable fees” restrictions prescribed in the KiwiSaver legislation.
What is the “PIE tax” regime?
The BCF Scheme is a PIE (portfolio investment entity). This means that members will only pay tax on their investment earnings from the Scheme at “PIE tax rates” of 10.5%,17.5% or 28% depending on their own personal income levels in the last two completed income years (1 April to 31 March).
You must advise the Administration Manager of your IRD number and PIE tax rate when joining the Scheme (pages 21 and 22 of the Investment Statement provides the necessary guidance). If you do not do both, then your PIE tax rate will be 28%.
Each year the income earned by the BCF Scheme on its investments will be attributed to you in proportion to your savings balance, and we will pay tax on that income at your PIE tax rate by deducting it from your balance. If the BCF Scheme were not a PIE then all members would pay tax at the rate of 28% on all investment income.
Where can I get more information?
More information about the BCF Scheme is contained in the:
- KiwiSaver in a Nutshell booklet; and
- Investment Statement and Application Forms.
Each of these has been prepared specially for the BCF Scheme.
If you have any remaining questions, please contact the Administration Manager either by phone at 0800 BCF INFO (0800 223 4636) or by email at [email protected].
If you need it, you can find more information at:
How do I make a complaint?
The Trustees have established a process to deal with any complaints that members might have.
The process is confidential, providing members with the ability to be satisfied that all their dealings with the Scheme have been handled properly. The first step is to contact either the Trustee or the Administration Manager in confidence to set out your complaint. Members also have the right to send their complaints directly to the Scheme’s external disputes resolution service, Financial Services Complaints Limited (FSCL). Contact details can be found on our Contact Us page.