Monitoring report coming from the FMA on KiwiSaver likely to call for more consistency of disclosure on fees and investment returns

Monitoring report coming from the FMA on KiwiSaver likely to call for more consistency of disclosure on fees and investment returns

The Financial Markets Authority (FMA) will soon issue a monitoring report on KiwiSaver that's likely to call for improvements to fee and returns disclosure, says the FMA's head of compliance monitoring Elaine Campbell.

Campbell told an FMA quarterly stakeholder market update that the report, due by the end of the quarter, was unlikely to outline any serious issues the FMA currently sees in KiwiSaver. However, the regulator believes more can be done on disclosure around fees and investment returns, especially in terms of the consistency of this disclosure.

The FMA issued a guidance note on KiwiSaver performance fees in May of last year. And in February CEO Sean Hughes released the FMA's Compliance Focus for 2013, with KiwiSaver named among five major themes to influence its priorities.

"For many New Zealanders, KiwiSaver will be their first investment and will impact their future financial security. Participants involved in KiwiSaver management, distribution and oversight must ensure they meet regulatory standards and act with customer interests in mind," the FMA says in its Compliance Focus document.

"This is important for members who are relying on KiwiSaver as a key pillar of their retirement savings strategy, but also for consumer confidence in New Zealand’s financial system and for the economy more broadly."

Of KiwiSaver in particular the FMA says focus areas for it include investments, unit pricing, disclosure, KiwiSaver scheme trustees, advice and fees. reported last October that KiwiSaver providers and related parties had pocketed almost NZ$440 million of fees in the first five years of KiwiSaver, which averaged out at NZ$87.5 million per year.

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What can one do if they think their kiwisaver providers numbers don't add up? Company Quarterly report claims my portfolio mix should have returned 5%, however it's only returned 1.6%... My questions are met with numeric gibberish answers. Please someone advise me.

Thanks, Mandalay

mandalay - my comment posted recently here may shed some light

Thanks Stephen... I appreciate your time. I have to say I am so tired of being lied to by the powers that be... sigh!

Hi mandalay - I will try to explain.
When anyone promises you a % return, they assume that you will invest a lump sum and your interest earnings are added to that lump sum.   So, $100 turns into $105 over 1 year if the interest rate promised was 5%. might not pay one lump sum over a year.   If you paid $10 every 36.5 days, you've still paid in $100 - but you won't get the $105 back, would you?  
Besides, tax is taken off your growth and there might have been a $ fee as well.  So when a KiwiSaver provider says that they have returned 5% over a quarter - they are assuming that they have had a lump sum of money for the entirety of the quarter.

Hi Black C. I do have a lump sum, a 40k one! As of today I have made a FAT ZERO profit this year and am moving in to the negative... all while watching the markets rise and rise and rise! It appears to me my provider is taking a little more than they ought to off the top or actually not investing it at all... With no chance of an independent review I just have to bend over and take it... My question is, with the huge amount of Kiwi money sloshing around KiwiSaver, the government needs to provide some sort of oversight body or Ombudsman!
Thanks for your time,
Cheers Mandalay

mandalay - you have once again hit the jackpot in respect of exposing the inadequacy of investor protection - I suggest you take notice of this RBNZ proclamation and investigate where your funds stand in terms of capital return risk

Thanks Stephen... so it's all good news then??? Sigh!

Crikey.   It sounds like you really don't trust your provider.  You can move it to another one at any time - you don't have to "bend over and take it".  If your provider has told you that the return is 5% and you have achieved 0% - then something is wrong.   Your provider needs to exlain it to you properly.        
There is an oversight body.   KiwiSaver schemes are regulated by the Financial Markets Authority.   Each provider needs to be in a Dispute Resolution scheme as well, which is free for KiwiSavers to use when there's a dispute.   
I think moving KiwiSaver providers because they haven't explained things is a perfectly valid reason to switch.

My portfolio returns since 1 January 2013 have now dipped to MINUS one %... I will be taking this up with the Disputes Resolution scheme - Thanks for the advice and don't put your money anywhere near SuperLife!