KEY POINTS:
Today marks one year of investment for KiwiSaver funds. Fund managers got their hands on the first allocation of money from savers on October 1 last year. It's likely that the performance of many will be negative given the massive fall in both the local and global sharemarkets during that time.
But investors should remember superannuation savings are long-term investments and most people will have plenty of time for their fund to recover before they get access to the money. There is also the fact that much of money is coming from the Government's coffers rather than our own pockets.
BY NUMBERS
Some interesting statistics have come out of the Government Actuary's office on KiwiSaver's first year.
As of June 30, 54 schemes were registered, 22 of which registered in the year to June 30 (the others had already registered before the launch of KiwiSaver.)
In the year to March 31 $722 million was invested in KiwiSaver schemes, of which $7.3 million was lost on investment. Just over $30,000 was withdrawn because of the death of the scheme member while nearly $3000 was taken out by people who suffered from financial hardship.
Of the 494,093 members most were new, although 630 transferred in from other superannuation schemes. Just over 63,000 were non-contributing members, presumably because they are children. Of those 161,391 were automatically defaulted into a scheme when they moved jobs - the highest number of those were in the 18-to-25-year category at 41,659 - more than double other age-groups, showing most of those in the younger category have come into KiwiSaver via the automatic enrolment process rather than through actively signing up. The nine biggest KiwiSaver schemes have $25 million or more each invested in them with 383,387 investors. But 13 schemes have less than $0.5 million each, raising the question of how long these schemes will last with such a small amount invested.
BEING PICKY
Some investors have also shown themselves to be very picky. Three investors in the year to March 31 had made more than five switches in their KiwiSaver fund while eight people had made more than four and 10 people had made more than three. More than 100 people had made more than two switches.
NO COMPARISON
One frustrating thing about KiwiSaver is that there is still no one place investors can go to to compare the performance of their funds. NZX-owned fund research and ratings firm FundSource has said it will look at it in the future, as has main competitor Morningstar - but so far no one has come up with the goods.
Some market commentators have downplayed the need for investors to be able to compare funds, saying it would encourage investors to chase last year's performers and compare funds that are very different, creating an apples versus pears situation.
But investors have a right to know what is happening to their money. Fund managers should be held accountable for their performances. At the moment it's too easy to say - well it doesn't matter what the returns are because the Government contributions more than cover the losses. But the system needs to be transparent in order for New Zealanders to have faith in it.
NOT SO SUPER?
The New Zealand Superannuation Fund yesterday revealed a drop of 4.92 per cent in its annual results - marking the first negative year it has had since it began investing in September 2003.
But the year to June 30 result is hardly surprising given the turmoil of the financial markets in the past year and it's important to keep that in perspective. Association of Superannuation Funds chief executive Bruce Kerr says it's pretty much in line with other superannuation funds.
"It's an acceptable performance given the market turmoil."
Figures from fund research house FundSource show the Super Fund has been far from the worst performer. Of the 24 superannuation funds it monitors in the diversified growth category, the average performance for the year to June 30 was -7.54 per cent. The worst was -12.2 per cent. While these figures are net of tax and fees the New Zealand Super Fund figure is only net of fees.
The Super Fund also has at least 15 years to go before it has to start giving money out to help prop up national super so there is plenty of time for it to recoup the loss.
DEVILISH DETAILS
Now the basic framework has been put in place for new tougher laws for financial advisers it's down to the Securities Commission and the industry to nut out the details of what advisers need to become authorised.
The biggest challenge is working out the minimum competency requirements for financial advisers. If they decide to make it a degree in financial advice it could be years before many advisers are qualified enough to become authorised.
Many financial advisers have no formal qualifications - just a lifetime of experience - does that mean they can't give good advice? Some might say so.
But industry leaders suggest a testing system will have to be introduced to measure experience or New Zealand will be left without enough authorised advisers to cover demand.
Any kind of minimum qualification will also need to be one easily recognised by the general public. Most people know an LLB means a qualified lawyer and a Bachelor of Accountancy is the minimum for a qualified accountant.
To give faith back to the general public - as all this work is designed to do - will take something that is easy to understand.
Given that it has taken five years to even get to this stage it seems pushing it to meet current Government timeframes to introduce it by 2010.
Industry leaders suggest it will take at least a year just to set up the minimum requirements for becoming authorised. Then it will depend on what the requirements are before it is known how long it might take to get the between 5000 and 10,000 advisers authorised.
However long it takes, it will be far too late to help any those caught up in the recent finance company collapses.
JOB SEARCH
The new legislation also specifies the appointment of a Commissioner of Financial Advice. The Ministry of Economic Development says the search is on to find someone qualified to fill the new role but it's likely to take three or four months to find the right person. The appointment may also need approval from the major political parties as any high ranking official appointed within three months of an election must go through more rigorous procedures.
However, as the Financial Advisers Bill itself received little opposition it seems unlikely whoever is chosen will fail to win approval unless it is a contentious appointment. But one thing is certain: whoever is appointed will have a tough job balancing the interests of an industry which is hugely diverse - insurance brokers, financial planners and investment advisers will all have their views on how things should be done. A code committee is also being formed.
