Retirement expert questions Govt choice of figures

Finance Minister Bill English. Photo / Mark Mitchell

A retirement policy expert says KiwiSaver providers should not be allowed to publish investment performance returns based on gross figures because they are "meaningless" and cannot be easily compared.

Finance Minister Bill English announced as part of the Budget that all KiwiSaver providers will have to produce quarterly reports from April including information on investment performance, fees and assets.

A report gives an example of how the information would be set out, placing the gross return percentage at the top of a table, which would also include dollar figures on the gross return based on a $10,000 investment, as well as dollar figures for the tax and fees paid and an explanation of how much in the hand investors would get.

But Retirement Policy and Research Centre director Michael Littlewood said publicity that emphasised gross returns should not be permitted or, if published, they should be given a lower prominence over the net return.

"Gross returns are almost meaningless and are certainly not comparable across providers," Littlewood said.

"Providers will naturally want to emphasise larger numbers, even if they are not meaningful."

Littlewood said New Zealand's tax on investment returns was so complex that it made it difficult to work out what the actual return on a fund was.

He said it was likely the Government chose gross figures because they were widely used overseas where in many cases individuals were not taxed on returns for retirement savings.

But a spokesman for the Ministry of Economic Development said net returns were harder to work out when investors were on different tax rates.

It had chosen to avoid using the terms gross and net because the average investor might not understand them, and the final presentation of the information could still change, he added.

Draft regulations are expected to be in place by September 1 to ensure providers have time to implement the relevant systems before the regulations come into effect in April.