KiwiSaver concerns could bring tighter reporting

Concerns about KiwiSaver could lead to greater disclosure and stricter regulation of non-default accounts, Commerce Minister Simon Power said today.

Concerns over the management of KiwiSaver funds have led to Mr Power fast-tracking work to ensure the integrity of the investments of the 1.3 million people who have $4.88 billion of their money invested in the scheme.

Huljich Wealth Management brought the spotlight on KiwiSaver account management after it failed to disclose that its managing director Peter Huljich had injected cash into the funds because they had not performed well.

Mr Huljich said he felt morally responsible for the investment decisions, but others said it was to give a false impression about the funds' performance. Mr Huljich has since resigned and the Securities Commission is investigating.

Australian investment research company Morningstar Australasia has also warned KiwiSaver investors to look closely at their providers, saying there is a very poor disclosure regime in New Zealand.

There are around 33 non-default KiwiSaver providers, which investors choose from, and six default providers, home for investors do not indicate a preference.

The regime for schemes which investors choose themselves is less rigorous with only annual reports necessary, which are difficult to compare.

Default providers require quarterly reports as well as independent corporate trustees.

"I think the argument must be in the current climate: is there a good reason why that regime should not apply to non-default?" Mr Power said.

"Part of the advice we need to get is whether the increase in cost as result of the regulatory changes would be passed back through the fund managers to investors."

Since KiwiSaver was set up the financial world had changed dramatically, Mr Power said: "It is timely now we are getting near the $5 billion mark to be asking some questions about the regulatory framing. I accept that (cost of regulation) must have been a consideration at the time, but a lot has changed."

Asked whether the Government feared there could be other non-disclosed transactions going on, Mr Power said it was right "up to a point" that there could be other questionable practices going that were not being disclosed.

He reiterated that just because the Government subsidised the saving scheme, no one should think they were getting a government guarantee.

"Governments don't guarantee this stuff and nor can they put themselves in a position of being a vicarous gurantor implied or otherwise, but what they have to do is get a regulatory regime which allows investors to make informed decisions. Getting an annual report.. I don't believe is enough."

Mr Power said once again the issue raised the question about whether regulators had sufficient powers and if there was a need for single super regulatory agency.

Mr Power confirmed he was leaning towards rolling the regulatory functions of the Securities Commission, NZX and other agencies into one body.