KiwiSaver

The Tax Working Group’s recommended tweaks to KiwiSaver are proof that any capital gains tax shouldn’t touch shares, retirement policy researchers say.

The group released its final report last week, recommending a broad capital gains tax across all investment assets, including shares and business IP.

It would mean fund managers would have to apply a capital gains tax to Australasian shares bought and sold by their funds.

The group tried to offset the impact of that by making KiwiSaver more appealing to low-income people – suggesting a refund of the employer contribution tax credit for low-income earners, a reduction in the two lowest KiwiSaver PIE rates and increasing the rate at which the $520 member tax credit is earnt.

But Susan St John, director of the Retirement Policy Research Centre, said the group  should not recommend tinkering with retirement savings policies to solve the problems a CGT might create.

She said it indicated that there were reasons to doubt the wisdom of any CGT regime that included shares.

St John said there were issues with all the suggestions, but the worst was the tax rate adjustments for the KiwiSaver PIE rates.

It would be a great pity to introduce these selective tax incentives with no analysis as to their impact or effect. One obvious problem is that to constrain the lower PIE rates to KiwiSaver alone would mean that people would potentially have two PIE rates. There would be inevitable pressure to extend the favourable treatment to all PIE schemes which would be very expensive and compound the inequity between PIE and non-PIE saving.

“None of these suggestions has been analysed for its distributional or gender effects. Retirement income policy should be left to the experts in retirement income policy,” said Claire Dale, research fellow at the centre.

While 2018 was a volatile year for KiwiSaver funds, all three Generate funds performed strongly versus the competition over the year and the past five years, according to leading investment research provider Morningstar.

Lead Portfolio Manager Sam Goldwater commended the survey results, noting: “As a New Zealand owned and operated KiwiSaver specialist we are proud of these results which are measured on a net return after fees basis. This means that our members received not only great relative performance but most importantly, excellent value for money.”

Performance highlights from Morningstar’s KiwiSaver Survey Report – 31 December 2018 (released February 2019):

• Generate Focused Growth Fund ranked 1st out of 10 for 2018 and 1st out of 7 for the past five years in the Morningstar KiwiSaver Multi Sector Aggressive category.
• Generate Growth Fund ranked 3rd out of 27 for 2018 and 3rd out of 21 for the past five years in the Morningstar KiwiSaver Multi Sector Growth category.
• Generate Conservative Fund ranked 1st out of 19 for 2018 and 2nd out of 12 for the past five years in the Morningstar Multi Sector KiwiSaver Moderate category.

Generate’s strong performance, straight-forward client advice and high service levels have helped make it the fastest growing KiwiSaver scheme over the past five years*. It is currently the 10th largest by number of members and manages approximately $1.1 billion of investments for its members**. These aforementioned factors have also helped Generate to receive Gold KiwiSaver status from SuperRatings every year from 2016 to 2019^.

CEO Henry Tongue says a key part of Generate’s offering has been providing simple and effective KiwiSaver advice to everyone who joins. As a result, Generate has more members in growth funds than nearly any other scheme. With more than $500m now invested in the Focused Growth Fund and a track record of 9.3% per annum after fees over the past five years, many Generate members are significantly better off, especially if they have transferred in from a default fund.

“We have prioritised educating and empowering all our members so they can make smart financial decisions and we have followed up by providing great service and performance.”

Tongue says Generate has become known for “being good” to its KiwiSaver members.

“Ninety-six per cent of new members say we provide them with valuable information and that talking with us was an excellent use of their time,” he says. “One of the most common feedback comments we get is “why didn’t someone tell me this sooner?!”^^.

Goldwater adds that 2018 was a notably “tough year” for the global equity market with international funds vulnerable particularly in the last quarter. However, Generate continued to produce strong relative performance.

“We’re delighted for our members that our funds continued to stack up very well against their KiwiSaver peers. Our active management style and hands-on approach certainly helped us in this endeavour.”

The Generate team are experts in KiwiSaver. They would love to hear from you to help you ensure your clients are getting the most out of KiwiSaver. Please contact Carl Pheasant at carl@generatekiwisaver.co.nz.

 

*Based on percentage growth of members and funds under management. **Workplace Savings Quarterly KiwiSaver Survey Sep 18. ^SuperRatings does not issue, sell, guarantee or underwrite this product. Go to superratings.com.au for details of its ratings criteria. ^^Generate New Member survey up to Dec 18.

A copy of our PDS is available here. Generate Investment Management Ltd if the issuer of the Generate KiwiSaver Scheme.

 

© 2019 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser.

There are concerns that a bill that would make it easier for foster children to access KiwiSaver may be stopped in its tracks.

The private member’s bill was introduced by National P Hamish Walker and would allow any foster parent to approach a KiwiSaver provider to open an account for a foster child in their care.

Financial Advice New Zealand had offered its members’ services, pro bono, to any foster kids who wanted advice with their KiwiSaver enrolment.

The bill passed its first reading and is before select committee.

But it has been reported that Oranga Tamariki opposed the plan.

Sam Stubbs, founder of Simplicity, said that was outrageous.

He said the plan should have been a no-brainer.

"You couldn't do a more innocuous thing for a kid."

He said, if it were stopped, it would be a "triumph of politics over children's welfare".

KiwiSaver would be a safe place for them to put their money, or for other people to put money for a child, he said. 

"The only losers [if it doesn't go ahead] are the kids. Denying them their financial welfare."

He said he had dealt with one mother who had been trying for five years to set KiwiSaver up for her foster kids. Normally, parents can do it in minutes.

Financial Advice NZ chief executive Katrina Shanks said she was keen to see the bill proceed.

"We talk about wellbeing and inequality – this is a way to amek it better for these kids."

A spokeswoman for Walker said he could not comment on "privileged information relating to his KiwiSaver (Foster Parents Opting in for Children in their Care) Amendment Bill, while it is working through Select Committee".

An authorised financial adviser who has been granted an exemption to offer personalised roboadvice says the process was an involved one.

Clive Fernandes is director and founder of National Capital, a financial advice firm that focuses on KiwiSaver.

It is the fourth business to be granted the exemption by the Financial Markets Authority, behind Kiwi Wealth, Nikko Asset Management and Cigna Life.

He said he had been working "behind the scenes" for the past seven months on the application process to be approved to offer financial advice, and building the KiwiSaver roboadvice service.

"Our digital advice service is aimed towards solving the issue of everyday Kiwis not having access to personalised advice for their KiwiSaver investments," he said.

"We currently have a working digital product which we are rolling out to an initial set of users. Users can start the advice process by going to our website and use the service there. We're working with a group of KiwiSaver providers and may add more as time progresses.

"Right now every piece of advice that goes out will be vetted by an AFA to ensure that the SoA is fit for purpose for the user based on the data provided and matches what a human adviser would recommend based on that data. Both data collection and delivery of the final recommendation happens online."

Schemes are ehortlisted using the FundSource performance tables and FundSource star ratings.

National Capital then uses Morningstar's quarterly KiwiSaver surveys to determine if the fees charged are reasonable. The highest rated fund is then recommended.

"We started off with the intention of using as many or even all of the KiwiSaver providers in our universe of funds taken into consideration," Fernandes said on his website.

"However, as we progressed on evolving the business model, we realised that it would not be feasible for us to monitor all 217 KIwiSaver funds. We then decided it would make more sense both from our and the clients perspective if we were to focus on a select group of providers that we were happy would be able to provide us with a good range of options from which to select appropriate funds for our clients from.

"We initially made contact with all the retail KiwiSaver scheme providers. We shortlisted those who had business policies that allowed and encouraged them to work with external financial advisers. We then had a series of meetings with representatives from all those schemes."

National Capital now works with Aon, ANZ, Milford Asset Management, Fisher Funds, Generate and Booster Investment Management.

On its website, it says it will not market itself as independent because it will be paid commission.

Fernandes said the process of applying for the exemption had been a long one.

"The application process was not an easy one, but it was well worth it. It has taken us six months to go through the exemption process, and part of the process was ensuring we had the right processes, policies and structure in place. I do not feel that the process could or should have been faster. We're talking about a service that could affect the lives of tens of thousands of Kiwis and I was impressed by the FMA's thoroughness and support through the process. 

"As a company, our focus is on good client outcomes, and having a robust compliance regime to ensure those outcomes. We've built our processes and structure not for what we are as a company now, but for what we aim to become. We're 100% focussed on KiwiSaver for now, since we believe it's an area we can effect the most good."