Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Ministry wants manager, investor alignment on KiwiSaver

Ministry backs aligning fund manager, investor interests in KiwiSaver review

By Paul McBeth

Nov. 13 (BusinessDesk) - Ministry of Business, Innovation and Employment officials back better alignment between the interests of fund managers and investors in KiwiSaver accounts as part of a review of the savings scheme's default providers.

Government officials say a balance needs to be struck between an efficient fee structure and maintaining service performance, which is complicated by the differing goals of fund managers and investors, according to a discussion document reviewing provider arrangements of the default KiwiSaver schemes.

MoBIE says there's an "inherent misalignment" between investor interests to maximise returns over the long term and fund managers, who want to increase funds under management, typically by focusing on short-term gains.

"Ideally the default product should be structured in a way that ongoing performance, relative to market performance, is linked to the ongoing appointment of the adviser," the report said.

"There is some evidence to suggest that higher fees do not typically translate into higher performance or higher returns," it said.

The ministry is calling for submissions on the discussion document as part of a scheduled review of the default providers, whose appointments expire at the end of June 2014. Submissions are open until Dec. 24.

Commerce Minister Craig Foss signalled the review in the May budget, saying at the time it would seek to examine the effectiveness of the default arrangements, and what their objectives should be.

The review excluded possible future changes to KiwiSaver settings, such as first home withdrawal, compulsion and transferability between providers.

The default providers were set up at the scheme's inception, so all members would be automatically enrolled in a conservative portfolio, giving them time to choose a more appropriate risk setting in the future. Of those starting in a default option, about 60 percent are still in the allocated scheme.

Earlier this year ANZ New Zealand said the default fund settings were costing KiwiSaver members $72,000 in potential savings over the course of their lifetimes. The bank pushed for a new approach based on a person's lifetime, adopting riskier investments early on and shifting to more conservative assets as they got older.

MoBIE said a "life-cycle fund offers a greater probability of increased asset growth than a conservative fund" but could be "administratively burdensome and costly."

The ministry is seeking submissions on whether the default portfolios should be kept as is, switched into balanced or aggressive allocations with more growth assets, or whether to introduced the life-cycle method.

A target-date fund, where the fund was linked to an end date, aligning it with an investors' age, was also touted as a possible option.

The report said the government doesn't favour introducing a single state-owned default provider, and sought feedback on options for the default providers.

It is also asking for submissions on how to transition members into any new arrangements.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Convention Centre: Major New SkyCity Hotel And Laneway For Auckland

Today SKYCITY Entertainment Group Limited revealed plans to build a new hotel and pedestrian laneway of bars, restaurants and boutique shopping on land it owns in the Nelson and Hobson Streets block, expanding the SKYCITY Entertainment Precinct. More>>

ALSO:

Igniting The Spark: Bringing The Digital Enabler To Life

Changing a name is, relatively speaking, the easy part of a re-invention. Changing a culture, getting all the ducks in a row, turning yourself inside-out to become customer-inspired is a much bigger challenge. More>>

ALSO:

Ebola And NZ: Targeted Screening At Airport But Risk Low

The risk of any cases of Ebola in New Zealand remains very low, but health and border authorities are well prepared... anyone arriving in New Zealand who in the last three weeks has visited countries affected will be screened for symptoms of the disease. More>>

ALSO:

Scoop Business: Brewer Seeking Crowd-Funding Cancels Shareholders’ Dividends

Shareholders in Renaissance Brewing company, the first business to seek equity through crowd-funding in New Zealand, have cancelled their claim on $147,000 of accumulated earnings “to make Renaissance a more attractive investment opportunity.” More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news