Monthly Archives: May 2019

SUMMIT RETIREMENT INCOME & THE TERMS OF REFERENCE

The New Zealand Superannuation and Retirement Income Act 2001 requires that the Commission for Financial Capability conduct three- yearly reviews of retirement incomes policies. The terms of reference for the review are set by the government.

To mark the beginning of the 2019 review the RPRC held a summit on 26 April at the University of Auckland.The Summit Proceedings : The 2019 Retirement Income Policy Review and You, are available here.

The purpose  of the Summit was to contribute to better understanding of the sector, the issues, and to the importance of the 2019 Review. Based on the terms of reference of the Review, a  wide range of issues were canvassed, including a contribution on international issues and financial institutions chaired by RPRC Research Associate David Harris of TOR Financial Consulting Ltd. We  look forward to the next few months’ debates on the policy issues that will be ​examined in the 2019 Review.We encourage your participation in the Review. You can register your interest by adding your name to the Commission for Financial Capability database.

Terms of reference for the 2019 retirement income policy review

Aspects of retirement income policies the review must address and the topics to be discussed in the Retirement Commissioner’s 2019 report:

  • An assessment of the effectiveness of current retirement policies for financially vulnerable and low-income groups, and recommendations for any policies that could improve their retirement outcomes.

 

  • An update and commentary on the developments and emerging trends in retirement income policy since the 2016 review, both within New Zealand and internationally.

 

  • An assessment of the impact that the following will have on government retirement income policies, including KiwiSaver and New Zealand superannuation:
  1. The changing nature of work, including the increasing number of people who are self-employed and/or working in temporary and flexible jobs;
  2. Declining rates of home ownership; and
  3. Changes in labour market participation of those 65 and older.
  • Information about, and relevant to, the public’s perception and understanding of KiwiSaver fees, including:
    1. The level and types of fees charged by KiwiSaver providers; and
    2. The impact that fees may have on KiwiSaver balances.
  • Information about the public’s perception and understanding of ethical investments in KiwiSaver, including:
    1. The kinds of investments that New Zealanders may want to see excluded by KiwiSaver providers; and
    2. The range of KiwiSaver funds with an ethical investment mandate.
  • An assessment of the impact of current retirement income policies on current and future generations, with due consideration given to the fiscal sustainability of current New Zealand superannuation settings.

 

  • Information about the public’s perception of the purpose and principles of New Zealand superannuation.

 

  • An assessment of decumulation of retirement savings and other assets, including how the Government can ensure New Zealanders make the most of their money in the decumulation phase.

Posted Alec Waugh May 20

 

Kiwi Saver Fee’s: MOVES IN THE RIGHT DIRECTION

BNZ is to be applauded. Can’t say the same for  some of the others e,g ANZ ,  and the timid comments from some , are typical of those  still trying to camouflage, the  Golden money mile that has existed in New Zealand for years with management fee’s.

BNZ move to trim KiwiSaver fees ‘may have other providers watching closely’

Susan Edmunds 11:51, May 06 2019

BNZ’s move to lower KiwiSaver fees has been described as a step in the right direction.

From May 1, BNZ will remove the $1.95 monthly KiwiSaver member fee and reduce management fees from up to 1.1 per cent a year to a maximum of 0.58 per cent.

“These changes remove important barriers to choosing the best fund for a customer’s needs, with the moderate, balanced, and growth funds now all on the same low fee. By this action, we’re removing fees as a consideration when deciding what fund to go into,”  chief customer officer Paul Carter said.

Under the new structure, a person with $20,000 invested in the BNZ Growth fund would have their fees more than halved, from $243 to $116.

AUT senior lecturer in finance Ayesha Scott said it was a good move.

“Any move to lower fees, enabling easier decision making and increasing accessibility of information is positive. While I cannot comment on whether the level of KiwiSaver fees is appropriate, BNZ’s move toward lower fees and easier-to-read disclosure is positive. ”

BNZ is also shifting from active management to a more passive approach for international investments, which Scott said was also positive.”I imagine other providers and the banks will be watching BNZ closely. “Her colleague, Aaron Gilbert, agreed.

“This is brilliant, exactly what has been needed for a long-time. So far we haven’t seen a lot of evidence on competition between KiwiSaver providers on fees but this suggests that it is starting to occur. ”

He said it was possibly driven by the introduction of low-cost options like Simplicity and the fixed fee model of Juno.

“It will be up to members to force providers to look at reducing fees by switching to lower cost providers. Academic evidence doesn’t show evidence that high-cost providers earn additional returns, nor that active managers out-perform passive managers. There is no reason not to look at the lower cost providers. And if enough people move, then other providers will have to match BNZ.”

The country’s biggest KiwiSaver provider, ANZ, said it had made changes to its fees, too.

“From April 1, ANZ has removed the membership fee for KiwiSaver members aged under 18 years of age, and has reduced the membership fee for all other members from $2 to $1.50 per month,” a spokesman said.

“We regularly review fees as we achieve greater economies of scale. As an active manager, ANZ believes it is important to focus on returns-after-fees, rather than just on fees. Active managers generally utilise a higher level of decision-making and analytics, and therefore the fees charged will typically be higher than those of a passive manager.”

Westpac said it also regularly reviewed its fees.

“Fees matter but they should be considered in the context of the service and return a scheme provides.

“The Westpac KiwiSaver Scheme has received the Platinum rating from independent research house SuperRatings for five consecutive years, and was described as a ‘best value for money’ KiwiSaver scheme. It also placed first-equal in a KiwiSaver customer satisfaction survey released by Consumer in April.

“When it comes to fees and returns, we believe the after-fee return is the most important thing for customers to consider. ”

Posted Alec Waugh

RETIREMENT INCOME PUBLIC SUMMIT: 26 APRIL 2019

HI to all. Having been off shore for  4 weeks, and then  a Kaspanz computer crash, its nice to be back online. I attended the above summit and the following perceptions ( valid or invalid) I noted on the flight home.

  1. NZ Superannuation model is  simple and sound,the cost pressures low in comparison to other OECD countries.
  2. Fiscal impact are always important, productivity improvements within the NZ economy would if achieved, overcome most future costing concerns.
  3. The Last Task Force on Retirement Income was 1991.
  4. The Retirement Commissioner will shortly be announced, it’s a cross-road appointment for this entity, who are also tasked with the 3 yearly review to Government due end of this year.
  5. Data capture on retirement income issues require improvement and comparative analysis Data within the OECD Is vital.
  6. Drawing down of funds from capital lump sums upon retirement needs both Government support and involvement.
  7. Financial Literacy is a great theory, nobody disagree;s but achieving it may be the impossible dream, so don’t waste resource trying?
  8. New Zealand Fee’s have been a golden mile for providers for a long time, NZ pays more in Fees than Aussie and most others. Government has to start talking this “outrage down”, someone has to cap  the excessive grab, and guidelines and monitoring is required.
  9. Women are often disadvantaged in schemes and pension etc.  Do something!
  10. Workforce participation by 65 yr old above  is  increasing rapidly. Probably due to necessity,  but only the educated have a real choice to  work or not. Recruitment agencies and work force HR groups, engage in active discrimination practice.
  11. How do we convince both the young, and the policy makers, the models of NZ Super/Kiwi Saver are sound and can be around for decades.
  12.  We are living longer, but are we healthier? Senior years its the quality of life issue, rather than living 2/3 years longer. Be wary of those who proclaim, the  senior years are so much more healthy.

Posted by Alec Waugh May 2