Power wants Kiwisaver improved

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

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"These changes are designed to plug gaps in regulation which, frankly, should have been addressed when KiwiSaver was set up," Mr Power said.

Huljich Wealth Management brought the spotlight on to 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.

Forsyth Barr savings specialist Gordon Tucker said it was good to see the industry regulations being tightened so that investors were being protected and serviced in a manner appropriate to what KiwiSaver set out to do.

"Investing in the past has mainly been targeted at those with money to invest, whereas KiwiSaver is designed for almost all New Zealanders and so needs to cater to a much wider spectrum of investor sophistication."

With such rapid and unforeseen growth, gaps in the system had become obvious.

"KiwiSaver is and will continue to be a fantastic scheme for the future financial wellbeing of New Zealanders, so it is imperative that any issues are resolved quickly and early on," Mr Tucker said.

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

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

The regime for schemes which investors choose themselves is less rigorous.

Only annual reports are required and they 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 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 vicarious guarantor, 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."