by Susan Edmunds
Schemes have a number of options in how they comply with the Financial Markets Conduct Act. (FMCA)
Unless designated as a restricted scheme, the standard requirements for a managed investment scheme mean governance must be divided between a licensed supervisor and a licensed manager, with a trust deed and a statement of investment policy and objectives that comply with the FMCA.
But if a scheme meets the requirements to operate as a restricted scheme and is designated as such, the requirement to have a manger licence and appoint a licensed supervisor does not apply, and instead the scheme only needs a licensed individual trustee as part of the scheme’s governance set up, be it as one of a group of individual trustees or as a director of a corporate trustee.
There are also provisions for legacy schemes to continue, provided they are closed to new members.
Mike Woodbury, of Chapman Tripp, said there had been meaningful attrition in workplace super schemes over recent years.
The FMCA was increasing the dominance of KiwiSaver schemes in the market and it made more sense for employers to encourage staff there, he said.
“Previously about a third of a million people, or 13% of the workplace, was in workplace schemes but that number when tested again will be a lot lower.”
David Ireland, of Kensington Swan, said a few of the traditional workplace super schemes had taken the latest round of changes as the opportunity to move into a master trust or wind up the scheme.
But he said the process had been going on since the 1990s, increasing the requirements on workplace schemes.
“It’s like a heavyweight boxer going into a 15-round fight. Each round they get knocked down but they come back off the canvas but each time they lose a bit more blood. They’ve taken a fairly heavy beating in the latest round, the changes are quite significant.”
He said more would have dropped out had the option to be a restricted fund not been available. “Two years ago when the regime first came into being we weren’t sure how many would survive and be willing to jump into the next wave of heightened regulation but in some ways more have survived than some had expected. [The restricted option] while more heavily regulated than was the case in the past does allow workplace super to transition in a way that doesn’t cause major restructuring and upheaval.”
But Ireland said the loss of workplace super schemes was to be expected. “A corporate super scheme model is something very few modern workplaces would justify. Especially starting a new one. It’s not just regulatory complexity – when I started work 30 years ago there were people who had jobs for life but now the workforce is more mobile and there is far lesser commercial rationale for employers to be involved.”
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