The MPs’ “private super scheme” explained — and how it could work for you
Published by Ross Holmes Virtual Lawyers (RHL)
This week the New Zealand Herald reported that Labour leader Chris Hipkins holds a private superannuation scheme that owns his family holiday home — and that contributions to the scheme are being used to pay off the mortgage on it. Asked about it, Mr Hipkins was unapologetic: it is, he said, his own retirement savings, no different in principle from contributing to a managed fund.
He is not alone. According to the most recent Register of Pecuniary Interests, several other MPs — including Melissa Lee, Jenny Salesa, Erica Stanford and Judith Collins — have also declared private superannuation schemes.
The political debate is really about something narrow: MPs receive a generous taxpayer-funded employer contribution into their schemes. Under the Parliamentary Superannuation Determination 2003 — made under the Remuneration Authority Act 1977 — an MP’s own contributions are subsidised at up to $2.50 for every $1 they contribute, capped at 20% of an ordinary (backbencher’s) salary. The cap is reached when an MP contributes 8% of salary; contribute less, and the subsidy reduces proportionately. On the ordinary-member salary applying from 1 July 2026 (around $181,200), that 20% ceiling is worth roughly $36,240 a year. That subsidy is a condition of the job. It is not a feature of private super schemes generally, and it is not available to you or me.
Strip the subsidy away, though, and what is left is a perfectly ordinary, entirely legal structure that very few New Zealanders know exists: the single-person self-managed superannuation scheme. This article explains what it is, what is required to set one up, and the tax treatment that makes it attractive for the right person.
What is a private (self-managed) super scheme?
A superannuation scheme is a trust whose principal purpose is to provide retirement benefits, registered under the Financial Markets Conduct Act 2013 (the FMC Act). KiwiSaver is one type. A retail super fund run by a bank or fund manager is another.
A self-managed scheme is the do-it-yourself version. It sits somewhere between a family trust and your own personal pension fund: you are the member, and you (through the trustee) decide what the scheme invests in. Instead of handing your money to a provider who selects “middle of the road” investments, you choose the assets yourself — direct shares, managed funds, cash, and even property. As Mr Hipkins’ arrangement illustrates, that property can include real estate the scheme owns and is paying off.
These schemes are uncommon but well-established. A handful of MPs, judges and professionals have used them for years, typically set up with the help of specialist lawyers.
What is required to set one up
The FMC Act treats most managed investment schemes as heavily regulated products — a retail super fund needs a licensed manager and a licensed supervisor, and a “restricted” workplace scheme needs a licensed independent trustee. Those requirements make a bespoke scheme prohibitively expensive for an individual.
The single-person self-managed scheme is the exception. The Financial Markets Authority (FMA) publishes a dedicated, lighter-touch path for it — approval as a “Schedule 3 approved scheme” — which sidesteps the full licensing burden. The essential steps are:
1. A compliant trust deed. The scheme must be a trust, established and governed by a trust deed interpreted in accordance with New Zealand law, with the principal purpose of providing retirement benefits. The deed must comply with the FMC Act and the Financial Markets Conduct Regulations, and must restrict withdrawals and benefit payments to those permitted by the regulations. In other words, the money is genuinely locked in for retirement. Getting this deed right is the heart of the exercise and is where legal drafting matters most.
2. The right trustee structure. The sole member of the scheme must be one of the trustees — or, if the scheme uses a corporate trustee, a director of that trustee company. Most schemes use a corporate trustee for continuity and limited liability.
3. FMA approval. You apply to the FMA’s compliance team for approval as a Schedule 3 approved scheme, providing the executed trust deed, a service address and the scheme’s balance date. The FMA’s published application fee is modest — currently $178.25 (incl. GST).
4. Registration and ongoing reporting. Once approved, the scheme is recorded on the superannuation register. Each year, you must prepare an annual report and a set of GAAP-compliant accounts (unaudited) within five months of the scheme’s balance date and lodge them with the FMA within 28 days of completion. There is currently no lodgment fee.
5. Standard compliance. The scheme is a reporting entity for anti-money-laundering purposes, and the trustees carry out the usual trust-law duties in addition to the FMC Act obligations.
The set-up fee paid to the FMA is small. The real cost is professional: drafting the deed correctly, structuring the trustee company, and the annual accounting and compliance work thereafter.
The tax benefits
Superannuation schemes in New Zealand are taxed on a “TTE” basis — Taxed, Taxed, Exempt:
• Contributions go in from your after-tax income (Taxed).
• Investment income earned inside the scheme is taxed within the scheme (Taxed).
• Benefits paid out to you are paid tax-free (Exempt).
The advantage lies in that middle step. A registered superannuation fund that is not a portfolio investment entity (PIE) pays a flat 28% on its investment income. If the scheme is structured as a PIE, income is taxed at the member’s prescribed investor rate, capped at 28%.
For a high earner, that 28% ceiling is the headline. Income that would be taxed at the top personal rate of 39% or at the 33% / 39% trustee rates if it were sitting in an ordinary family trust is instead taxed at 28% inside the scheme. Over years of compounding, that gap is meaningful.
Two further points round it out:
• Benefits are tax-free on the way out, and receiving them does not reduce your entitlement to New Zealand Superannuation, which is neither income- nor asset-tested.
• New Zealand has no general capital gains tax, so long-term gains on many investments held by the scheme are not taxed — though property gains can still be caught by the bright-line and “intention” rules, and offshore shares can be caught by the foreign investment fund (FIF) rules. These need careful, case-by-case advice.
Who it actually suits
A self-managed super scheme is not for everyone. It tends to make sense for people who:
• are on the top marginal tax rate, so the 28% shelter is genuinely worth having;
• have enough capital to justify the set-up and annual running costs;
• want direct control over their investments, including the ability to hold property or specific shares the scheme owns; and
• are comfortable with ongoing administration, reporting and trustee responsibilities.
The trade-offs are real. The money is locked in for retirement — this is not a flexible savings account. There is annual accounting and FMA reporting. And the trust deed must be drafted to comply with the FMC Act from day one; a defective deed can undermine the whole structure.
The bottom line
The structure that put Chris Hipkins in the headlines is neither exotic nor a loophole. It is a recognised retirement-savings vehicle with a clear, FMA-sanctioned set-up path and a genuine tax advantage for the right person. What the MPs get on top — a taxpayer-matched employer contribution — is a quirk of their employment, not of the scheme itself.
If you have substantial assets, a preference for managing your own investments (including property), and you are tired of paying the top tax rate on your investment income, a self-managed super scheme is worth serious consideration. Ross Holmes Virtual Lawyers Limited can establish your self-managed super scheme.
Want to know whether a self-managed super scheme fits your situation? RHL can advise on the structure, draft the trust deed, and manage the FMA approval process from start to finish. Get in touch.
This article is general information only and is not legal, financial or tax advice. The rules summarised here are complex, and your circumstances are unique. Please obtain specific advice before establishing any superannuation scheme.
