We do take responsibility for our KiwiSavers - Tower

Press release: In the wake of the Government's budget announcement yesterday, TOWER Investments CEO Tony Hildyard said today that he was pleased that the new Government initiatives have both raised the profile of KiwiSaver and made it more attractive to investors.

Friday, May 18th 2007, 10:10AM

But although it was positive that people were now talking about KiwiSaver, he felt concerned about some comments that had been made that weren’t factually correct.

"It's great that we're debating the merits of KiwiSaver because people are really starting to see the positives and think about the opportunities it provides. What we do need to look at is some of the misinformation that’s out there and make sure people are given the information they need to make a good decision about whether or not to sign up.”

Specifically, Hildyard said he felt that some financial commentators didn’t seem to understand fiduciary responsibilities of KiwiSaver fund managers, trustees and sponsors, and that some of the information being presented was factually incorrect. He said that this was particularly evident in a radio interview with Gareth Morgan this morning.

"There has been some confusion about the roles of the fund manager and the sponsor. The sponsor of the product, the party who brings the product to market, doesn't have any fiduciary obligations to investors. It is the fund manager and the Trustee who have these obligations."

Hildyard said that while it was true that there was no Crown guarantee for any KiwiSaver product, fund managers such as TOWER have obligations at law and under their trust deeds, and TOWER has obligations for any losses that arise from "willful or negligent default", breaches of trust or dishonesty.

"You can't provide any superannuation or managed fund product and not take responsibility. That goes for KiwiSaver as well. Our trust deed sets out these obligations very clearly, and we stand by them.”

Hildyard said that he took issue with Morgan’s comments on fees and returns and his claim that investors would be “lucky to get 40%” of the return on their money. Hildyard said this isn’t always true, and cited TOWER’s Balanced Fund (one of TOWER’s KiwiPlan funds) as an example. The fees on this fund averaged at less than 10% of the after-tax returns.

Another important point was that under KiwiSaver, all providers’ fees (including Morgan’s scheme) have been negotiated with the Government Actuary. “And going back to the budget announcement, now that these fees are subsidised, they are becoming less and less relevant.”

Further information to note:

The Trust Deed for TOWER's KiwiSaver product, KiwiPlan, provides that the Sponsor of the product, who brings the product to market, does not themselves have any fiduciary obligations to investors - fiduciary obligations are owed when someone is in a position of trust and confidence and has duties to act for someone else's benefit. A Sponsor does not have a fiduciary role.
The Trust Deed is clear however that TOWER, in its role as Manager, is liable and has obligations where losses arise through its willful or negligent default, breach of trust or dishonesty. The obligations of the Manager will be set out in a management agreement with the Trustee.
The Manager and the Sponsor may not always be the same entity - they are currently but another TOWER entity could be appointed Manager
As required under the KiwiSaver Act, KiwiPlan has an independent Trustee.
The Act provides that there is no Crown guarantee for any KiwiSaver product.
TOWER, as Manager, is required to invest with the care diligence and skill of a prudent professional fund manager, and cannot contract out of that duty.

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