Businesses Still in the Dark on KiwiSaver

Press Release: Just one week out from the introduction of KiwiSaver, a majority of employers still feel they need more information on the new workplace savings scheme, according to a snapshot of businesses taken by New Zealand’s leading business management solution provider, MYOB.A nationwide survey of over 300 businesses of all kinds, conducted last week by MYOB, found that almost 60% of respondents felt they still needed more information to understand their KiwiSaver obligations.

And despite the release of the initial KiwiSaver employer packs and the launch of a nationwide advertising campaign, almost 20% of businesses surveyed said they were now more confused than ever.

MYOB managing director Matt Lynch says the widespread uncertainty, particularly over the new scheme’s compliance requirements, has become a real issue for local businesses.

“As 1 July draws closer, more and more employers are realising that they are not prepared to manage the implementation of KiwiSaver in their business,” says Lynch.

“Without more help, it seems a majority of businesses are going to struggle to meet their compliance requirements.”
Lynch says MYOB has been working with local businesses for the past six months to provide education and training about KiwiSaver, as well as providing an online guide to the new scheme.

“The nationwide seminar series we have been running on KiwiSaver, in conjunction with ASB Group Investments and the Department of Labour, has been our most popular to date, attracting thousands of business people across the country.”

“We’re also about to launch a KiwiSaver User Guide to our customers, with a step-by-step guide to implementing KiwiSaver using MYOB payroll solutions,” says Lynch.

MYOB is currently the country’s largest payroll provider, helping pay over 600,000 New Zealand employees. The company has been working with the IRD to ensure its latest payroll products and services are KiwiSaver compliant.

“The real issue, however, is for those businesses who aren’t using an automated payroll product or payroll provider and are struggling to understand the new scheme,” says Lynch.

“They are going to need some more help and soon.”

ABN AMRO Craigs adopts Gatekeeper for KiwiSaver fund providers

Press release: Leading superannuation e-commerce system provider InvestmentLink today announced ABN AMRO Craigs has adopted the cutting-edge Gatekeeper solution for KiwiSaver product providers.ABN AMRO Craigs, which has a network of more than 100 advisers operating from 16 offices nationwide, and servicing more than 60,000 clients, joins Mercer NZ as a high-profile early adopter of Gatekeeper.

“Gatekeeper is a true multi-tenant software application, and we welcome ABN AMRO Craigs as our latest tenant,” said InvestmentLink NZ’s ceo, Maurice MacLaren.

“Gatekeeper delivers the electronic B2B functionality mandated by the NZ Inland Revenue Department (IRD) for communicating with scheme providers.”

Jan Jensen, cio at ABN AMRO Craigs, said: “Gatekeeper provides true ‘Software as a Service’ benefits. We gain a ready-built application so we can implement our scheme quickly. ABN AMRO Craigs also gains ongoing maintenance and support from InvestmentLink’s experienced specialists in superannuation data services, as well as a full range of access, service, security and support benefits from a state-of-the-art data centre running around the clock.”

ABN AMRO Craigs Senior Product Manager Stephen Jonas said ABN AMRO Craigs’ new kiwiSTART product was a logical development of its popular START investment product, given the recent incentives for KiwiSaver investors proclaimed in the NZ Government’s recent Budget.

“The Budget changes required ABN AMRO Craigs to re-prioritise our planned launch of a KiwiSaver scheme,” he said, “but one key issue for us was to deliver a cost-effective solution.”

“With less than five months between the Budget and KiwiSaver contribution flows commencing from IRD, our analysis identified that InvestmentLink’s Gatekeeper solution offered the best overall package of business benefits for ABN AMRO Craigs: A low capital investment, a very low level of project risk compared with alternative solutions, full compliance with IRD’s B2B requirements, and immediate delivery before the October 1 deadline.”

MacLaren said KiwiSaver scheme providers were faced with complex, time-consuming and expensive challenges to deliver KiwiSaver technology.

“Shared technology solutions, such as Gatekeeper, have significant advantages in terms of innovation, cost and risk reduction,” MacLaren said. “They are also more capable of swiftly complying with myriad changes to regulations and technology interface requirements we predict as political parties, employers and the media get to grips with KiwiSaver and all its implications over the coming few years.”

Peter Philip, ceo of InvestmentLink in Australia, said the compliance cost per investor over the long term was what mattered for any KiwiSaver scheme.

With some KiwiSaver scheme providers already indicating investment payback likely to be at least five years away, any additional cost of systems compliance to accommodate new regulations down the track just push out the day when a provider actually starts to make money from offering a KiwiSaver scheme.

“Just ask any senior manager at a superannuation provider who has operated in Australia over the past 10 years,” Philip said. “They will confirm the business costs of frequent legislative changes. The evidence in Australia attests to the very real benefits of a shared cost of ownership model in an environment of frequent regulatory change.

“Our solutions will provide significant benefits to the NZ super industry, and what’s more, they have been proven over the past decade in Australia’s compliance-focused $1 trillion super sector.”

Gatekeeper is the first module in InvestmentLink’s suite of shared industry infrastructure products for KiwiSaver providers that will be rolled out over the next 12 months.

Website to clarify hidden KiwiSaver fund fees

Press Release: Choosing the right KiwiSaver fund with the lowest fees and best performance from the dozens on offer will give the average wage-earner enough extra money over twenty years to buy a brand-new luxury car when they retire.The trick is knowing which one of the funds will make that kind of difference, and a website is being launched to provide that information.

“Smart KiwiSaver (www.smartkiwisaver.co.nz) is the only place where intending Kiwi savers will find independent information and true comparatives for all the funds on offer”, said the director of Trident Research Systems Phillip Harris.

“We will find the hidden fees and include them in published performance data of the funds.

“Having tens of thousands of dollars more at retirement time won’t come from following investment brand names, investment celebrities, going to ‘independent’ seminars, or trying to read wordy investment statements,” he said.

“Professional investment managers and financial planners instead rely on the funds performance data that’s number-crunched and provided by independent firms like Trident Research Systems.

Smart KiwiSaver’s easy-to-use consumer-orientated advice and calculator website starts its work on 1 July, and is based on the same Trident Research Systems software used by investment administrators and financial planners to guide their decisions when investing hundreds of millions of dollars.

Trident Research Systems of Christchurch has been providing fund performance analysis for the finance industry for over 20 years (see www.tridentresearch.co.nz which includes references from major participants in the finance industry).

The introductory cost of joining Smart KiwiSaver is a flat fee of $29.90 for the first year.

“For someone on just the average wage who is retiring in 20 years, a 2% per annum difference in performance can mean $70,000 more at retirement time,” said Harris.

Employers could confidently refer employees to Smart KiwiSaver knowing their staff can choose a KiwiSaver fund, on the basis of independent advice, that best fits their savings objectives.

“Maintaining the best balance of risk and return as time goes by means Kiwi savers can be sure they are always using the best-performing KiwiSaver fund from the dozens on offer.

“Like the funds analysis we’ve been providing to the financial industry for over twenty years, the recommendation provided by Smart KiwiSaver is based purely on the performance of the fund, and the risk associated with achieving that performance.

“Smart KiwiSaver’s performance data will also include the fees being charged by the fund manager. The accepted measurement for this is known as the management expense ratio (MER), which acts to reduce the return from the fund.

“Smart KiwiSaver takes all costs including the MER into account when we publish a KiwiSaver fund’s return,” said Harris.

KiwiSaver: nest egg or hot potato?

Press release: “We should brace ourselves for a game of KiwiSaver political hot potato, says Ernst & Young.

National has refused to let taxpayers know whether they support the new turbocharged version of KiwiSaver – employer contributions – and it will seek to embarrass the Government in any way possible,” says Jo Doolan, Tax Director at Ernst & Young.

Employers and employees alike will hardly be filled with confidence as the introduction date nears, she says.
Last week, in a barrage in the House, National’s deputy leader Bill English alleged that the fiscal cost to the Government of the tax incentives will be more than the incremental household savings to come from KiwiSaver, citing Treasury forecasts in support. The forecasts were rejected by Hon Dr Michael Cullen.

“Dr Cullen should be congratulated on the ingenuity of his turbo-charged KiwiSaver and the fact this is being phased in to allow employers to deal with the financial cost. But shouldn’t employer contributions – such a fundamental change to KiwiSaver – be agreed to by both the major parties? If they can work together on anti-smacking issues then surely setting a framework for savings is also important enough to warrant such an agreement?

Wage negotiations – will we see ‘KiwiSaver discrimination’?

“We really do not know how compulsory employer contributions to KiwiSaver will impact on wage negotiations,” says Doolan.
At a recent Ernst & Young client seminar Cullen reminded attendees of just how little influence the Government really has over wage negotiations given the low percentage of private sector employees who are actually part of collective bargaining agreements.

“Take for example, two employees who perform the same and have the same experience. One elects to go into KiwiSaver the other does not. Can the employer offer more pay to the one who does not opt to go into KiwiSaver to compensate them for the fact the employer does not have to fund their compulsory KiwiSaver contributions?

“I wonder whether we could see the advent of a new type of claim, for ‘KiwiSaver discrimination’?

Australia – trillions of dollars in the lead

“It’s clear that Kiwisaver is designed as a rather large shove from behind to ensure we are very focussed on achieving the Governments agenda of greater productivity,” says Doolan.

“At the Ernst & Young seminar, Cullen also reminded the audience of the advantages Australian companies have from the trillion dollar-deep pool of savings generated by Australia’s compulsory scheme. And that every time an Australian private equity firm crosses the Tasman and invests here, they are doing so with money saved by Australians who have been encouraged to save through active government policies for nearly twenty years.

“If the funds invested from KiwiSaver provide a capital base that ultimately helps control our extortionate interest and exchange rates, any negativeness about compulsory contributions to KiwiSaver will be overcome.”

Questions And Answers – Thursday, 14 June 2007

Press Release: Office of the Clerk

Hon Bill English: Has the Minister seen the estimates by his own department, Treasury, that show that the increment to household savings arising from KiwiSaver will be less than the fiscal cost to the Government of the incentives it will apply to KiwiSaver, and can he explain why the taxpayer would be spending more on incentives than the country gets in savings?

Hon Dr Michael Cullen: Treasury provided a variety of estimates over a period of time. I think that the reaction to KiwiSaver once the announcements were actually made indicates we will see a significant rate of take-up and far less of the behaviour that Treasury was forecasting.

Hon Dr Nick Smith: So Treasury got it wrong.

Hon Dr Michael Cullen: Yes.