YouWealth Balanced Growth Fund amalgamation

In February 2024 we’re merging the Balanced Growth Fund into the Balanced Fund. This means that all investors in the Balanced Growth Fund will move into the Balanced Fund, and the Balanced Growth Fund will close.

Both funds have broadly similar allocation to income assets and growth assets, so the risk return characteristics are very close. However, we believe the Balanced Fund has the potential to provide higher risk-adjusted returns over time making it a more favourable option for investors looking to achieve a medium level of return over the medium to long term.

Here’s what investors need to know:

Automatic transition: You don’t need to take any action regarding this fund amalgamation. Our team will handle the transition on your behalf.  You won’t incur buy and sell spread adjustments and there won’t be any change to fees charged due to the amalgamation.

The amalgamation process will start on 28 December 2023 where we’ll begin to align the Balanced Growth Fund’s income and growth asset allocation to match the Balanced Fund. The amalgamation will be finalised in February 2024 and you’ll see the change reflected in the BNZ app and Internet Banking once it’s completed.

Rest assured, if you’re invested in the Balanced Growth Fund at the time of the amalgamation, you’ll automatically be moved to the Balanced Fund.

Avoiding unnecessary costs: There’s no need to switch from the Balanced Growth Fund to the Balanced Fund in advance of this amalgamation. It’s important to note that making the switch yourself will incur buy and sell spread adjustments, which will not be incurred by the automated transition that will happen during the amalgamation.

Tax: We calculate tax from returns on your YouWealth investment each day and pay it to Inland Revenue at the end of the tax year (31 March), or upon any withdrawal or switch out of a fund. This amalgamation will require us to calculate tax on your investment in the Balanced Growth Fund at that date and we’ll settle that tax by selling units (or issuing you additional units if you are due a refund) in February. This will be reflected in the number of units issued to you upon the amalgamation. Any further tax due on your investments up to 31 March will be settled at the end of the tax year.

How do you calculate tax on my investment?

Managed funds are portfolio investment entities, and returns are taxed at a maximum of 28% because you’re taxed at your prescribed investor rate (PIR) instead of your personal income tax rate. So, if your income tax rate is over 28%, you’ll pay less tax on your YouWealth returns.

Your YouWealth account is typically invested in thousands of different securities (such as shares and bonds) around the world, and different securities are taxed in different ways. For example, shares in international companies are usually taxed on a percentage of their market value, while most Australasian companies only incur a tax on dividends. In contrast, cash and bonds in the portfolio are taxed on their total return.

This means your investment gain (or loss) can differ from your PIE taxable income (or loss).

We keep a record of how much tax needs to be paid or refunded throughout the year, and we take all of this into account whenever tax needs to be settled, such as during a fund amalgamation, when switching out of a fund, and at the end of the tax year (31 March).

Timeline of the Balanced Growth Fund amalgamation:

Late December 2023 – Mid February 2023

Balanced Growth Fund asset allocation will be realigned. Any changes to asset allocation will be within the allowable investment ranges as set out in the YouWealth Statement of Investment Policy and Objectives (SIPO).

Mid February 2024

Over the amalgamation period there may be a small delay in processing transactions and withdrawals while the amalgamation is finalised.

Late February 2024  

Once the amalgamation is complete, your Balanced Fund account balance will be available to view in the BNZ app or Internet Banking.

If you’re unsure about whether to take action based on the outlined changes, please contact a financial advisor. 

BNZ Investment Services Limited, a wholly owned subsidiary of BNZ, is the Issuer and Manager of YouWealth. Download a copy of the relevant Product Disclosure Statement from bnz.co.nz  Investments in YouWealth are not bank deposits or other liabilities of Bank of New Zealand (BNZ) or any other member of the National Australia Bank Limited group. They are subject to investment risk, including possible delays in repayment. You could get back less than the total contributed. No person (including the New Zealand Government) guarantees (either fully or in part) the performance or returns of YouWealth or the repayment of amounts contributed. National Australia Bank Limited, the ultimate owner of BNZ, is not a registered bank in New Zealand but a licensed bank in Australia and is not authorised to offer the products referred to in this email to customers in New Zealand.

Any views expressed in this article are the personal views the author and do not necessarily represent the views of BNZ, or its related entities. This  article  is solely for information purposes and is not intended to be financial advice. If you need help, please contact BNZ or your financial adviser.

Neither Bank of New Zealand nor any person involved in this article accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any, information, representation or omission, whether negligent or otherwise, contained in this article.