KEY POINTS:
Teething issues which have left next of kin facing a costly process to gain access to the proceeds of KiwiSaver accounts for deceased family members may be sorted out in the tax bill now before the Government's finance select committee.
Speaking at an industry superannuation conference last week, Finance Minister Michael Cullen acknowledged there were issues around KiwiSaver and estate planning.
Trustees have complained the prescriptive nature of the KiwiSaver Act has meant there is no legal way for them to pay out small amounts of money to family members without having to go through a full legal process.
That process involves either gaining probate, where the court has to confirm a deceased person's will, or gaining letters of administration through the court.
But at a cost of at least $1500 it has meant for some cases it is not worth going to the effort.
Cullen said he had consulted legal advisers and it appeared there was a conflict between the KiwiSaver Act and the Administration Act.
"What Peter Dunne and I have told our officers to do is do some more policy work on this and do some more work on this around estate management."
Cullen said there were also question marks over who would inherit the proceeds of KiwiSaver investments for children if they died and there was a custody battle.
"In current society children are already a battle ground.
"We will need to look at some changes around that."
So far more than 90,000 under 18s have been signed up to KiwiSaver.
Cullen said it was important not to rush any changes but if alterations did need to be made they could be tacked into the tax bill now before the finance and expenditure select committee.
But any changes are unlikely to be made until next year as the bill is not expected to go to Parliament before it shuts down for this year's election.
ADVISER CRACK-DOWN
One piece of law which is expected to be passed before the election is the Financial Advisers Bill.
Designed to toughen protection for investors and crack down on advisers, it is back on the agenda in Parliament today, despite calls from the industry not to rush it through before the election.
MPs will have a chance to comment on recommendations by the finance and expenditure select committee to create two tiers of financial advisers based on what products they give advice on, as well as the appointment of a commissioner of financial advisers to the Securities Commission.
The recommendations have changed dramatically from earlier proposals to have a co-regulatory relationship between approved provider bodies and the Securities Commission.
But the sudden changes - the latest recommendations only came in a report released on August 8 - have the industry worried.
Institute of Financial Advisers chief executive David Hutton said in his submission to the report that he was "very concerned" that haste to pass the legislation this year was "compromising" the quality of it.
But Commerce Minister Lianne Dalziel has said "no way" to a slow-down.
She wants the framework regulation passed as soon as possible with the details worked out later.
And it seems unlikely any other party will be keen to slow-down the legislation either, with it being viewed as a key move towards greater investor protection following the raft of finance company collapses.
SUPER MONEY BETTER LEFT IN OZ
The superannuation industry has poured cold water on the Government's plans to sign an agreement with Australia to allow Kiwis to transfer money locked up in Australian super funds back home.
Mercer, which provides advice to superannuation schemes in New Zealand and Australia and also runs a KiwiSaver fund in conjunction with Kiwibank, said New Zealanders would be better off financially if they left their savings in Australia and picked them up tax-free from the age of 60.
Mercer New Zealand head Bernie O'Brien said Australians were generally taxed at 15 per cent on their superannuation investments, whereas New Zealanders were charged either 19.5 or 30 per cent tax on KiwiSaver investment returns depending on the individual's prescribed investor rate.
New Zealanders also have to wait until retirement age, at present 65, to cash up their KiwiSaver investments.
New Zealand and Australia are expected to sign the agreement next month, with legislation due to be introduced in 2009 allowing portability of superannuation savings between the two countries.
One industry commentator even took it a step further, saying he would be prepared to work in Australia for a year to get his KiwiSaver savings transferred over there in order to pay less tax.
INFRASTRUCTURE BONDS SOLUTION
National Party finance spokesman Bill English has criticised KiwiSaver for failing to see more money invested in New Zealand businesses.
One of the main drivers for the scheme has been the hope it will help build up New Zealand's struggling capital markets as KiwiSaver schemes invest their money over time.
But English said conversations with fund managers suggested many believed New Zealand companies were too risky to invest in.
Instead he has suggested the possibility of allowing infrastructure bonds to be created through public/private partnerships for infrastructure projects.
The investments would allow the Government to borrow money from investors to build infrastructure such as roads while paying them interest. The money is then paid back on a set date likely to be years away.
However Finance Minister Michael Cullen has criticised National for wanting to get the country into further debt.
National's long-awaited KiwiSaver policy is expected to be revealed as part of a tax package to be announced once the Government opens its books - likely to be in a few weeks' time.
TRANSPARENCY NEEDED
Retirement Commissioner Diana Crossan has told the superannuation industry it needs to smarten up its act and become more transparent in order to win back the public's faith following fall-out from the finance company collapses.
"We are all aware there is something of a crisis of confidence. I have heard a number of New Zealanders lump finance companies and KiwiSaver together," Crossan told the Association of Superannuation Funds conference last week.
She said the finance company collapses were a problem for investors tied up in those firms but that didn't mean the whole sector was failing.
But regardless of that, people's perceptions were negative and that meant the sector had a definite problem.
"We need to have confidence in the businesses that look after our money. We want to work with the finance sector to enhance trust.
"But people don't trust what they can't understand."
Crossan said much of the information provided by the industry was opaque and used financial terms the average person did not understand.
One key example were the fees associated with KiwiSaver.
In putting together the Sorted website's fees calculator it was found some schemes had up to 10 different fees.
"It shouldn't be that hard.
"Ask yourself how can you trust a service provider if they can't tell you simply how much the service will cost?"
Crossan also criticised the first annual statements to come out of KiwiSaver providers.
She said a quick survey of her team showed they were very hard to understand.
* Do you have concerns about the quality of information you're getting from KiwiSaver providers? Contact: tamsyn.parker@nzherald.co.nz
