An Operational Viewpoint

1
An Operational Viewpoint
Grant Robertson Head of Relationship
Management Jacques Martin New Zealand Limited
2
Who are Jacques Martin?

• BPO Organisation specialising in the
  administration of financial services products for
  over 350,000 New Zealanders
• Superannuation administration gt50 of our
  business
• Act on behalf of gt20 clients administering 50
  superannuation schemes
• Interactions to gt1,500 employers
• TOWERs administration partner for TOWERs
  KiwiSaver product

3
Presentation Overview

• What is KiwiSaver
• An Employees View
• Choice of Provider
• Options and Impacts for Existing Schemes
• Role of the Employer
• Impact on the Financial Services Industry
• Important Next Steps

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What is KiwiSaver?

• 27 August 2006
• I think KiwiSaver is going to be a mess.
• Michael Littlewood, co-director of the Retirement
  Policy Research Centre
• 28 August 2006
• A state of the art, elegant, simple yet
  effective retirement savings scheme.
• Jonathan Eriksen, Eriksen Associates Ltd

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KiwiSaver a High-level Overview

• Government initiative commencing 1 July 2007 to
  help New Zealanders financially prepare for
  retirement
• Centrally administered by the IRD
• Multiple Providers with the same core rules
• Smaller set of Default Providers
• Opt out scheme for new employees aged gt18 years
• Opt in for existing employees

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How Will an Employee Become a Member?
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The Employee Trade-off

• Maintain existing salary position
• v
• Contributions will be deducted from their first
  pay at the rate of 4 (default rate) or 8
• To get
• 1,000 kick start Government contribution
• Government Fee subsidy
• Employer contributions up to 4 are SSCWT free
• First home purchase scheme

8
Choice of Provider

• How should the employee choose
• Choose a Default Provider
• Choose an alternative Approved Provider
• Leave it to the Employer
• Leave it to the IRD
• What happens if I have existing superannuation
  arrangements?
• What role should the employer play?

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What Happens if I Have Existing Superannuation
Arrangements?

• 5 July 2006
• It is recognised and accepted that there is
  likely to be some rationalisation/consolidation
  of the industry products and providers in
  response to the introduction of KiwiSaver.
• Officials Report on the KiwiSaver Bill

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Options for Existing Schemes

• Become an Approved KiwiSaver Scheme
• Introduce a KiwiSaver section to your existing
  scheme
• Apply to become an exempt employer
• Wind up

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Options for Existing Schemes

• An Approved KiwiSaver Scheme
• New scheme or conversion of existing scheme to
  KiwiSaver scheme (member consent required)
• Must meet the core criteria of a KiwiSaver scheme
  e.g. lock-in
• Introduce a KiwiSaver section
• New section of existing scheme (no impact to
  existing members)
• Effectively two schemes sharing one Trust Deed
• Employees can potentially be a member of both
  schemes

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Options for Existing Schemes

• Apply to become an exempt employer
• Scheme or schemes must meet the core criteria of
  KiwiSaver
• Exempts employers from automatic enrolment
  obligation
• Employees can still opt in to KiwiSaver
• Wind up
• Trustees decision that existing scheme does not
  meet the members best interests post-KiwiSaver

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Choice of Provider

• How should the employee choose
• Choose a Default Provider
• Choose an alternative Approved Provider
• Leave it to the Employer
• Leave it to the IRD
• What happens if I have existing superannuation
  arrangements?
• What role should the employer play?

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Role of the Employer

• Mandatory administrative obligations
• Employers must provide an information pack to new
  employees within 7 days of commencing employment
• Supply new employee details to IRD with the next
  EMS
• Commence deducting contributions immediately
• Receive advise from IRD to stop contributions

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How Far Should an Employer Go?

• Hands off or hands on?
• Will the Employer choose a Preferred Scheme?
• Will the Employer seek a channel for advice to
  members?
• What will the Employers approach to SSCWT be?

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When is the Right Time for an Employer to Decide?

• "Our strategy is to wait to see what the
  Government comes up with before we finalise our
  own."
• Peter Merry, Executive General Manager for Human
  Resources, Fletcher Building

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What will KiwiSaver Meanto the Financial
Services Industry?

• Significant investment
• Uncertain returns
• Impact on existing business
• Legislated timeframes
• PIE (Tax changes)

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Operational Challenges for Providers

• Project commencement pre-dates legislation
• Resource capacity
• Capacity requirements
• Alignment with Inland Revenue
• Mortgage diversion
• February 2006
• mortgage diversion is unworkable and too
  complex
• Report on Cabinet agreement on mortgage diversion.

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Important Next Steps

• SSCWT decision
• Appointment of Default providers
• Public engagement
• Employer engagement
• Industry engagement
• Inland Revenue Preparedness

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Any Further Questions?

• Grant Robertson
• Head of Relationship Management
• [phone]
• Rodney Strong
• KiwiSaver Product Manager
• [phone]