Improvements to KiwiSaver regulation

Improvements to KiwiSaver regulation including periodic reporting, increased fund manager and trustee responsibility have been introduced in a bill to Parliament.

Wednesday, September 15th 2010, 7:39AM 4 Comments

by Jenha White

The changes are included in the Financial Markets (Regulators and KiwiSaver) Bill which also formally establishes the new super regulator, the Financial Markets Authority.

Commerce Minister Simon Power says the bill allows for regulations to be drafted requiring periodic reporting by retail funds on fees, returns, and asset allocations, as the six default funds currently do.

"We have undertaken extensive, targeted consultation with industry to develop a discussion document setting out a framework for periodic reporting by funds, and we'll be seeking feedback on this shortly."

ING head of KiwiSaver distribution David Boyle says he welcomes the commonality of fees reporting which from a transparency perspective is a positive for everyone.

"It's a good thing for everyone to be on a level playing field," he says.

Power believes though KiwiSaver is not Government guaranteed, investors are entitled to a level of information that enables them to easily compare schemes and make informed choices and these changes will ensure that happens.

Also under the bill KiwiSaver fund managers will be primarily responsible for the accuracy of their prospectus, investment statement and advertisements.

Power says currently, KiwiSaver trustees are technically the ‘issuer' of the KiwiSaver scheme under the Securities Act.

"Fund managers have few direct duties to investors, and significantly less liability for misleading statements than the trustee."

He says the changes will also require trustees to be responsible for supervising managers and making sure they comply with trust deeds and their other responsibilities.

This will allow KiwiSaver trustees to come under the proposed Securities Trustees and Statutory Supervisors Bill, which is before Parliament and they will need to be licensed by the Financial Markets Authority.

Power says the regulatory regime around KiwiSaver needs to be robust for the 1.5 million people who have more than $6 billion in the scheme.

"The Government has fast-tracked this work because it's become increasingly evident that the governance and oversight of retail KiwiSaver schemes could be better."

He says at this stage, the changes will not apply to existing non-retail KiwiSaver schemes - that is, employer-based and other vocational-based schemes - or non-KiwiSaver superannuation schemes.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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Comments from our readers

On 15 September 2010 at 2:18 pm Independent Observer said:

This is good news for consumers - and bad news for many of the struggling Kiwisaver schemes who are barely surviving.

On 17 September 2010 at 7:00 am Wayne Ross said:

With regard to fees this will only be of any value to investors if "other fees" are capped and there is transparency of underlying fund mgmt fees to address the current anomoly between including the cost of listed vs unlisted securities.

In terms of AA the key will be timely actual data rather than target.

Now that there has been "extensive targeted consultation" with the foxes in the hen-house we can all rest easy...

On 20 September 2010 at 12:12 pm Broker Bob said:

Everything standardised so easeier to compare schemes? Sounds good but how will Gareth Morgan fit in with this? And how will he still say everyone but him is ripping the public off?

On 28 September 2010 at 3:26 pm Pravin said:

Government is always in need of money for large developments in the country for Infrastructure. Why should the Kiwisaver amounts collected by IRD to be passed on to various Kiwisaver providers resulting into their own peril. Why not Government retain the scheme money and it will not only result in National pride, but also help in large developments.