With less than a month to go before New Zealand’s semi-compulsory workplace savings scheme kicks off, 14 providers have registered approved KiwiSaver products with the Government Actuary.
As well as the six default KiwiSaver providers – AMP, Axa, Tower, Mercer, ASB and ING – several other financial institutions, an accountancy firm and a high-profile investment advisory business have registered schemes with the Government. It is expected that at least 20 providers will have KiwiSaver schemes in place before the July 1 start date. Westpac Bank, one of the latest providers to register a scheme, said last week it would offer a capital-protected KiwiSaver product. Westpac, whose funds management subsidiary BT missed out on default status, released information about the capital-protected scheme in the same week as critics rounded on KiwiSaver for its lack of government guarantee. KiwiSaver providers have also been criticised by well-known economist and investment adviser Gareth Morgan, who has launched his own scheme to combat what he described as questionable practices of insurance-based institutions. Among the practices Morgan has slammed included unit pricing, reserving of funds and attempts by providers to opt out of their fiduciary duty to investors. In a statement Morgan said: “;Gareth Morgan KiwSaver’s been devised to try to clean up this industry by offering an alternative. “Hopefully this effort will force the life insurance participants who regretfully are the main default providers to clean up their act… I’m going to win.”; Meanwhile the Government Actuary has confirmed trail commissions will not be able to be deducted directly from KiwiSaver accounts. “Any KiwiSaver fees must meet the requirements of Rule 2 of Schedule 1 and be included in the investment statement. Attention should be given to whether the fee matches the service provided,” the Actuary says on a government website. “We do not believe that it is appropriate for such a service fee to be deducted directly from members accounts. We also do not consider the provision of financial planning services can fit [the KiwiSaver rules].” However, several fund managers such as ING and Sovereign (a subsidiary of the Commonwealth Bank of Australia) are offering trail commissions of between 15 and 25 basis points to financial advisers who sell their KiwiSaver products. The trail will deducted from the managers’ MERs rather than directly from member accounts. From July 1 all new employees will be automatically enrolled in a KiwiSaver default fund unless they select another product and can choose to contribute either 4 or 8 per cent of their gross salaries. In the May Budget the government also revealed it would compel employers to match employee KiwiSaver contributions up to 4 per cent of gross income as well as providing tax credits. Compulsory employer contributions will phased in from April 1, 2008, adding 1 per cent a year until 2011.
Insignia Financial has shifted to outsource administration of its $180 billion superannuation assets, inking a deal with SS&C and reassigning 1300 workers to the service provider during the process. The decision stands in stark contrast to peers such as Aware Super, which recently internalised member services, but CEO Scott Hartley said that option is a “costly exercise”.
Darcy SongDecember 10, 2024
