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

 

Govt officials eye default KiwiSaver settings

By Paul McBeth

Aug. 7 (BusinessDesk) - Ministry of Business, Innovation and Employment and Treasury officials want feedback on whether the government should alter default KiwiSaver provider settings to promote responsible investment.

The government departments are holding their seven-yearly review of the nine default scheme providers, whose contracts expire at the end of June 2021. Among the issues they're seeking feedback on is whether default KiwiSaver funds should be required to invest ethically or provide better information on a scheme's approach to responsible investing.

Officials noted that a number of providers started excluding controversial sectors following public scrutiny of their investment practices, and that they've been criticised for not developing socially responsible investment criteria and for being opaque about where money is invested.

"One view is that there is public interest in responsible investment, and that it is appropriate for the government to change the default provider settings to achieve this. Several stakeholders have said that the current requirements for responsible investing are not robust enough, and that there should be stricter responsible investment criteria in the default provider settings," government officials said.

They've put forward two options for submitters to consider. One would require mandatory exclusions of certain industries or companies, and the other would require default providers to adopt a standard disclosure for responsible investment.

Both would result in higher fees, but could lead to higher confidence and trust in KiwiSaver. And officials considered that they could offer more value-for-money, assuming members wanted their investments to be made more responsibly, and could build out the range of products in the market.

Of the country's 2.9 million KiwiSaver members, about 715,000 are in default funds. Of that, 430,000 haven't made an active decision to stay in default funds, which typically opt for a very conservative investment strategy of cash and bonds.

Finance Minister Grant Robertson signalled the review will investigate how to attract the million or so Kiwis who haven't signed up to the state-sponsored scheme, which has beaten uptake predictions since its inception more than a decade ago.

The main goal of the current review is to enhance the financial well-being of default members, especially in retirement. To achieve that, MBIE and Treasury officials are actively considering whether to change the investment mandate to a life-stages approach, or to apply a balanced or growth investment strategy.

A number of fund managers had lobbied for the life-stages approach to be adopted in the previous review, but then ministers Bill English and Craig Foss chose to stick with the conservative mandate, which they called a risk-averse approach.

Officials also want feedback on how to reduce fees, saying the increase in funds under management hadn't led to cheaper fees as expected.

"While we accept that fees are only one component of a valueformoney service, we want to see reductions in fees for default funds as a result of this review and subsequent procurement process," the discussion document said.

Among the options under consideration are whether the government should simply set the fee, whether the percentage-based fees should reduce as funds under management grow, whether fees should be considered during the next default provider appointment process, whether there should be exemptions for under-18s and low balances, or whether there should be no annual fees.

The review also wants feedback on how to help develop the capital market, and whether it should direct default providers to conduct some of their investments domestically, and if there should be a minimum allocation for alternative New Zealand assets.

Submissions close on Sept. 18 and the procurement to appoint new providers is expected to start early next year.


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Ground Rules: Government Moves To Protect Best Growing Land

“Continuing to grow food in the volumes and quality we have come to expect depends on the availability of land and the quality of the soil. Once productive land is built on, we can’t use it for food production, which is why we need to act now.” More>>

ALSO:

Royal Society: Calls For Overhaul Of Gene-Technology Regulations

An expert panel considering the implications of new technologies that allow much more controlled and precise ‘editing’ of genes, has concluded it’s time for an overhaul of the regulations and that there’s an urgent need for wide discussion and debate about gene editing... More>>

ALSO:

Retail: Card Spending Dips In July

Seasonally-adjusted electronic card spending dipped in July by 0.1 percent after being flat in June, according to Stats NZ. Economists had expected a 0.5 percent lift, according to the median in a Bloomberg poll. More>>

ALSO:

Product Stewardship: Govt Takes More Action To Reduce Waste

The Government is proposing a new way to deal with environmentally harmful products before they become waste, including plastic packing and bottles, as part of a wider plan to reduce the amount of rubbish ending up in landfills. More>>

ALSO:

Earnings Update: Fonterra Sees Up To $675m Loss On Writedowns

“While the Co-op’s FY19 underlying earnings range is within the current guidance of 10-15 cents per share, when you take into consideration these likely write-downs, we expect to make a reported loss of $590-675 million this year, which is a 37 to 42 cent loss per share." More>>

ALSO: