DATE OF ISSUE: 6 APRIL 1995
FRIENDLY SOCIETY INVESTMENT RULE CHANGES AND RESTRUCTURES
Introduction
The purpose of this instruction is to advise on rule changes and restructures proposed for certain friendly society investments and to describe the treatment for service pension purposes of these investments following such changes. The friendly society investments affected are:
the Australian Pacific Friendly Society (APFS), Telecom Managed Investment Bonds No.1 and No.2; and
the Over 50's Friendly Society (Over 50's), Tax Effective Savings Funds which incorporates an existing fund known as the "Flexible Insurance Fund" (but now renamed as the "Over 50's Fixed Interest and Mortgages Fund"), and two new funds called the "Over 50's Balanced Fund" and the "Over 50's Growth Fund".
Australian Pacific Friendly Society - Rule Changes
Background
2.On 16 February 1995, APFS advised that it had ammended the rules governing the operation of two funds, namely the Telecom Managed Investment Bond Fund No.1 and the Telecom Managed Investment Bond Fund No.2 to allow investors to switch money between the two funds.
3.The switching option has been available to investors in the funds from 31 October 1994.
Treatment of saved investments where money is switched between funds
4.Where a pensioner holds an investment in either of the Telecom Managed Investment Bond funds, and that investment is assessed under the saved managed investment rules (assessed on realisation) because it was made before 1 January 1988, any transfer of money between the two funds will not be considered to be a realisation for the purposes of subsection 5J(7) of the VEA. In other words, the saved status of funds invested in one of the Telecom Managed Investment Trust Funds is preserved if such funds are transferred to the other Telecom Managed Investment Trust Fund.
5.This conclusion comes about due to the interpretation of the realisation provisions of subsection 5J(7) of the VEA as previously detailed in paragraph 9 of DI B54/94. DI B54/94 dealt with the similar restructure and associated rule changes of the IOOF (Victoria) Supersaver Flexible Insurance Policy No. 1 Fund. Please refer to that DI for more detail.
Over 50's Friendly Society - Funds Restructure
Background
6.On 20 February 1995, the Over 50's Friendly Society advised of a restructuring of investment products whereby an existing investment fund would be combined with two new funds to create an investment product that allowed investors to switch money between the three funds.
7.The table below shows the name of the new product, plus the names of the old fund and the two new funds which the product incorporates.
Product Group Name |
Old Fund Name |
New Fund Name |
Over 50's Tax Effective Savings Funds |
Flexible Insurance Fund |
Over 50's Fixed Interest & Mortgages Fund |
Over 50's Balanced Fund |
||
Over 50's Growth Fund |
8.The restructure and associated amendments to the rules of the society will allow switching between the renamed fund and the two new funds from 14 April 1995.
Treatment of saved investments where money is switched between funds
9.Where a pensioner holds an investment in the Over 50's Fixed Interest & Mortgages Fund (previously the Over 50's Flexible Insurance Fund), and that investment is assessed under the saved managed investment rules (assessed on realisation) because it was made before 1 January 1988, any transfer of money between that fund and the Over 50's Balanced Fund or Over 50's Growth Fund will not be considered to be a realisation for the purposes of subsection 5J(7) of the VEA. In other words, the saved status of an investment in the Over 50's Fixed Interest & Mortgages Fund (previously the Over 50's Flexible Insurance Fund) is preserved if such an investment is transferred to either of the new investment funds comprising the Over 50's Tax Effective Savings Funds product. Similarly, the saved status of an investment transferred between any of the three funds is also preserved.
10.Again, this conclusion comes about due to the interpretation of the realisation provisions of subsection 5J(7) of the VEA as previously detailed in paragraph 9 of DI B54/94. Please refer to that DI for more detail.
Enquiries
11.If you have an y enquiries in relation to this Instruction, please contact Laurie Howell on telephone 06-289 6706.
NEIL BAYLES
ASSISTANT SECRETARY
INCOME SUPPORT BRANCH