Having Super Choice

Personal superannuation schemes in New Zealand have historically suffered from tax inefficiencies for those on lower tax brackets, as well as limited investment choice. In respect of the latter, choice appears to have been largely restricted to vanilla diversified managed funds from conservative through to growth options, along with some sector fund options. KiwiSaver paved the way for addressing the tax issues with the introduction of the PIE regime and PIE compliant KiwiSaver schemes.

Curiously though, while many providers have stepped up to the plate with a KiwiSaver solution, like the personal superannuation schemes of old, investment choice is still largely restricted to a limited range of diversified fund options. However, I suspect that as KiwiSaver fund balances grow, investors will take a much greater interest in their investment options and demand more services and choice than is available today.

As a custodial wrap provider, Aegis understands investment options only too well. A typical portfolio administered on the Aegis service has between 15 and 20 investments with an average aggregate portfolio value between $250,000 and $300,000. The largest portfolios have more than 50 different assets.

Furthermore, portfolios administered by Aegis are typically a combination of direct investment into cash, fixed interest and equities, as well as managed funds. Interestingly, the introduction of the PIE regime has done little to change the composition of direct investment versus managed funds, though many of the domestic managed funds available through the Aegis service have morphed into PIE funds. In principle, why should the range of investments on offer from super schemes be any different to non-super portfolios, and why shouldn’t they include access to direct investment in cash, fixed interest and equities?

The answer is, there is no reason, it’s just the way superannuation schemes and serviceshave been developed to date. Now Aegis has addressed this by developing a new superannuation scheme called Investor Choice. Conceptually, Investor Choice is a superannuation scheme utilising the Aegis wrap platform functionality which, subject to trustee and investment manager approval, provides investors (via their advisor) with potentially the same range of investments, both direct and managed funds, that is currently available to other non-super portfolios administered through Aegis.