KiwiSaver

As the KiwiSaver infrastructure matures the range of offerings available to KiwiSaver investors will grow, and will eventually include absolute return and alternative investment products such as hedge funds.
Press Release

“A 2004 report presented to the New Zealand Superannuation Fund by Eriksen and Associates recommended an increase in the benchmark weighting to alternative assets,” said The New Zealand Absolute Return Association Inc Chairman Anthony Limbrick.

“Since then the fund has diversified into alternative investments including an allocation to hedge fund products.”

The association believes that as the KiwiSaver investor becomes more sophisticated, as has happened with Australian investors under their compulsory superannuation framework, KiwiSaver portfolios will come to resemble scaled-down versions of the New Zealand Superannuation Fund.

“It is a misconception, especially with regards to the hedge fund industry, that absolute return offerings are leveraged, and therefore highly volatile,” continued Limbrick.

Some specific products are designed to give high returns with accompanying high volatility. However, the absolute return industry is highly diverse with a wide range of return and leverage profiles to choose from.

“An allocation to absolute return products has the potential to both reduce portfolio volatility and enhance returns and we believe local investors will come to understand that premise.” says Limbrick.

He says as the absolute return industry has evolved and become accepted by institutional investors, it has become more “institutionalized”, and with that comes the expectation of higher standards with regards to risk management and regulatory compliance.

NZARA sees its role as encouraging industry “best practice” as well as educating New Zealand investors as to the benefits, and risks, of investing in absolute return investment products.

In addition the association is working to improve the regulatory environment for absolute return investment managers and promotes the New Zealand industry offshore.

NZARA is the organization representing the absolute return investment and hedge fund industry in New Zealand and has been in existence since July 2005.

Revenue Minister Peter Dunne has re-emphasized employers’ obligations under the KiwiSaver superannuation scheme, following concern expressed in a letter to the editor in today’s DominionPost.
Press Release

In the letter, the writer says he is a job seeker who was told by a reputable retailer that KiwiSaver is a voluntary scheme but the company’s staff had no spare energy to administer it and recommended the job seeker consider starting his own retirement scheme.

Dunne said, “If the facts are as outlined, then that’s not good enough.

“Employers are required to automatically enrol new employees, make deductions from their first pay day and forward those on to Inland Revenue along with PAYE, child support deductions etc.

“The employer must provide a new employee with a KiwiSaver information pack within 7 days of starting employment.

“Employers must also provide information packs to existing employees who request one. If the employee wants to opt-in to KiwiSaver the employer must start making deductions as above.”

Government will pump an estimated $3 to 4.5 billion a year into KiwiSaver members’ accounts, which is effectively a tax cut reserved only for those who can afford to take it up.
Press Release

The chief executive of the Northern Employers & Manufacturers Association Alasdair Thompson says taxpayers who cannot afford to save in the scheme, and those ineligible like those 65 or older, will be contributing towards its costs.

“Strangely no commentators have bothered to cost the scheme’s impact on Government’s accounts, Thompson said.

“If only half the eligible workforce join KiwiSaver the cost will ultimately represent $3 to $4.5 billion charge each year against Government’s accounts.

“On top of this are the costs of employing another 1200 public servants to administer the scheme, which runs into hundreds of millions of dollars.

“KiwiSaver could have been delivered far more efficiently.

We said Cullen could give personal tax cuts without inflation by directing tax cuts go into KiwiSaver (28/1/2007).

“Every income earner could have been automatically signed into the scheme.

“Instead the Government chose to launch an administration heavy money-go-round, and denied access to older people, those at work under 18 years and, in effect, low income people.

“The $1000 per person kick start will cost around $1.5 billion, and the Government’s tax credit per person of $1040 will add another $1.5 billion or more, each year.

“The compulsory contribution from business could also reduce business taxable earnings on top of the cost of the tax rebates to businesses. These will add another $1.5 billion.

“No wonder so many fund providers are scrambling to register for KiwiSaver with all those fees at stake!

“The huge costs also raise other questions, such as what will happen to taxation adjustments in future.

“And how do the costs of KiwiSaver affect the National Party’s position on tax cuts, and the ultimate reform of KiwiSaver, should they lead the next government.”

The government will remedy a technical problem in the KiwiSaver legislation to ensure the smooth introduction of the new member tax credit, Finance Minister Michael Cullen and Revenue Minister Peter Dunne announced today.
Press Release

As announced in Budget 2007, people who join KiwiSaver will be entitled to a tax credit that matches their contributions up to $20 a week from when they become a member. That will be paid directly into their accounts annually, they said.

As it is worded, the legislation does not reflect this policy intent, with the result that some savers would not become eligible for the tax credit until several weeks after they began making contributions. That is not how the legislation was intended to work.

Therefore we will be introducing a law change ensuring that savers will be eligible for the member tax credit from the date they begin making contributions.

The member tax credit will apply from the first of the month in which the contribution is made. This means, for example, that all contributions that begin in July will be matched by a tax credit from 1 July; those that begin at any point in August will count as having begun on 1 August, and so on.

The change will be added to the taxation bill that is currently before Parliament by means of a Supplementary Order Paper to be released within the next few weeks, the Ministers said.