This article was published on 5 September 2020. Some information may be out of date.

Q&As

QWhen I first arrived back in New Zealand from overseas and started working, Bonus Bonds were my means to save to escape and start travelling again (with the prospect of the envelope in the mail saying that I was a winner in the latest draw.)

I think that, over 48 years or so, I have won about three lots of $20. Well that’s with an investment of only $500 (I think). But still, as the fund grew, and my numbers grew more zeroes in front of them, the chances of winning anything became very slim.

I’ve decided not to withdraw my savings with the hope that (after expenses) my little nest egg (perhaps a humming bird) will have the last chance of growing a bit. Is that wise? Hopefully they still have my address intact to let me know!

AAs everyone must know by now, ANZ has announced the end of its Bonus Bond Scheme, basically because low interest rates are making the prize pool too small. Since 2009, says ANZ, the annual pool has dropped from $100 million to $34 million.

Almost a quarter of all New Zealanders — 1.2 million people — hold Bonus Bonds. And more than half of them are over 65. They have to decide whether to take their money out in the next few weeks or wait until the scheme is wound up, probably within a year.

If you wait, not only will you probably have two more monthly prize draws — although it may be just one — but you might also get some extra from the reserves after the windup.

I look at the decision this way: You’ve been gambling — albeit in a pretty mild way — with that money for all these years. Why not continue for another year or so? If it was a lot of money, you should consider where else you could invest it in the meantime. But that doesn’t seem to apply here.

And it seems pretty certain you will at least get all your money back. “The board believes current reserves are sufficient for bondholders to be confident they will receive back their initial investment,” says ANZ. And the Financial Markets Authority (FMA) has said it will monitor the wind-up process.

But how much more might you get? I asked the bank for some idea. The reply: “It will depend on how much remains in the scheme’s reserves — which is the difference between the market value of the fund (the net assets of the Scheme) and the bonds on issue — when the scheme is wound up.

“The reserves currently stand at more than $100 million. Expenses, the number of bondholders remaining in the scheme when the wind-up process starts, and the actual price we realise for the scheme’s assets will all influence the level of reserves which will be distributed to remaining bondholders.”

I pushed for a likely range. I did try! But the spokesman just referred me to the above quotes.

So you’ll be waiting and hoping — and perhaps feeling a little bit sad. Bonus Bonds haven’t been a great investment for most people. But for you, it seems they were important psychologically back when you bought them. As the violins play, let’s acknowledge that that is worth something.

QFor the last few years we have purchased Bonus Bonds each week rather than Lotto tickets. While we haven’t won any prizes, at least we will get our money back!

I understand that if you wait until the winding up process is complete, you will participate in any remaining surplus in the Bonus Bond fund.

The fund manager, ANZ, may not be able to contact all Bonus Bond holders to redeem their bonds. Will the funds associated with bonds that are not redeemed (i.e. holders can’t be located), be included in the remaining surplus that is distributed to bond holders who stay in until the end? This could make not redeeming now far more attractive.

ABut wouldn’t you feel just a wee bit like a vulture? Anyway, it’s not an issue.

Says an ANZ spokesperson, “The unclaimed bonds and a pro rata portion of the reserves will be passed to Treasury as unclaimed monies. They won’t form part of the reserves to be distributed to bondholders when the scheme is wound up.”

He adds, “Bondholders who make a claim after monies have been passed to Treasury will be entitled to their share of the reserves as well as their original investment.” Sounds fair.

More on Bonus Bonds next week.

QCould you explain for the self-employed why they should use KiwiSaver? Robbing Peter to pay Paul? What’s the point?

AI assume from your Peter and Paul bit — and note you are writing to Mary! — that you think self-employed people pay employer contributions into KiwiSaver.

Not so. The self-employed, and everyone else who is not employed, simply contributes whatever they want into KiwiSaver. And every year, in July or August, the government puts in 50 cents for every dollar you put in — up to a maximum from the government of $521.

A good way to contribute is to set up automatic transfers from your bank account of $87 a month. That will get you the $521.

That subsidy means that your savings are multiplied by 1.5. So if you would have retired with $100,000 outside KiwiSaver, you will instead have $150,000. It’s worth getting.

QAbout your recent Q&A about trusts: unfortunately I am in a similar situation. I am a 33-year-old mother with two small children. My husband set up trusts before we were married in 2014. I don’t on paper own anything.

Would love if you looked into women in first marriages, no earning potential due to small children and my husband’s busy job. That does not allow me to work, but I’m completely cut out financially.

The trustees of my husband’s trusts are his father and uncle, and our children are beneficiaries. It’s an awful situation to be in, and it affects our marriage.

AI bet it does. I wish you had challenged the set-up before you married. But what can be done now? Could your husband dismantle the trust?, I asked trust and estates lawyer Rhonda Powell.

“Yes, it is usually possible to distribute trust property out, if this is agreed upon. This would depend on the terms of the trust deed,” she says.

But if that doesn’t happen, and you two break up, is there some way the trust could be overruled?

“If the Trust was set up in contemplation of the marriage, it may be a ‘nuptial trust’, in which case it may be possible to apply to the Court to have it divided under the Family Proceedings Act 1980,” she says.

“It is also possible to ‘claw back’ property which might otherwise have been available for division and which has been transferred to a Trust. You would need focussed legal advice from a lawyer with a specialist interest in relationship property and trusts to ascertain whether these are options.”

What a colourful expression “claw back” is in these situations. But it seems you need more than ferociousness.

Powell continues, “The other things that could help if the relationship ended are spousal maintenance — spouses have duties to support one another financially even after the relationship ends for a ‘reasonable’ time.

“It is unlikely that everything is in the Trust, and any property in the husband’s name (such as his KiwiSaver, and any investments and bank accounts) could be relationship property.”

However, she says, “The unfortunate truth is that claims against Trusts at the end of relationships are very expensive to pursue.” It would be so much better if you can get things changed now.

Time for an honest talk with your husband. Given there are no complications from an earlier marriage, his justification for a trust has got to be challenged.

QJust read in your column about the men who put everything in a trust before they marry again.

My husband and I put our rental and our home where we live in a trust. This was recommended to us for tax reasons to do with a rental property.

Now if one of us passed away and the other one wanted to marry again, what would be the best thing to do to do justice to the new partner? As far as I know it would be very difficult for the remaining partner to dissolve the trust.

AYou’re worrying too much. Rhonda Powell says it’s nearly always possible to end a trust and distribute the assets at an appropriate time, as noted above.

But she has a better idea. “I would suggest the way to do justice to the new partner is to focus on the general principle that pre-relationship assets are separate property, and assets built up during the relationship are shared.

“As such, I don’t see anything unjust in leaving the trust in place, particularly for the rental property. If this seemed unfair in the circumstances, then the family home could potentially be distributed out or even resettled on a new trust that involved the new spouse.

“It is also possible that the new spouse could be added as a beneficiary of the existing trust, and could benefit that way, if that is what is intended.”

QYour recent columns on trusts in the Herald have highlighted some problems with the use of trusts.

The trust has its origin in the German concept of a Treuhand, a trustworthy “hand” to hold and administer assets on behalf of someone else, mostly a minor or other person under disability. The trust has, unfortunately, become a charter for crooks, if not in the legal sense, at least in the moral sense, as the cases you mentioned demonstrate.

The reason for the trust is often given as “to protect my assets.” But protect the assets from whom?

  • Assets that would otherwise be relationship property are placed beyond the reach of the spouse or partner.
  • Creditors are locked out of a business’ assets by an owner who put all of his/her personal assets in a trust, and then conducted the business taking huge risks at the expense of creditors.
  • Children from one relationship are preferred over those from another.
  • Descendants are treated differently when a deceased estate has to be distributed.

The list is long. The solution is simple: At the breakdown of a relationship, the insolvency of a business or the distribution of a deceased estate, all of the trust assets should be placed back whence they came, and all the competing claims to those assets should then be considered.

The creator of the trust should be required to prove that he or she had a sound reason for the creation of the trust and the nomination of the beneficiaries — other than to protect those assets from the types of claims mentioned.

This is not a novel idea. In company law the courts “lift the veil” to ascertain who really was the driving force behind a limited liability company. In insolvency law creditors who have been preferred over others have to prove that the payment was made in the ordinary course of business and that the business was not insolvent at the time. There’s a similar situation in maritime law.

AHear, hear! From your qualifications it seems you know what you’re talking about.

And now, as newspaper editors used to say, “No further correspondence on this topic will be entered into”. Not for a while, anyway.

QI just wanted to say that I bloody love your column! In particular last week — 40-year-old single mum trying to buy a home — I can relate.

It’s very refreshing and reassuring knowing there are other women out there like me. I will persevere with my dream of home ownership, slowly but surely. That is all.

AThat’s what this is all about. Thanks for brightening my week.

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Mary Holm, ONZM, is a freelance 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 [email protected] or click here. 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.