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An Operational Viewpoint

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Alignment with Inland Revenue. Mortgage diversion. February 2006 ' ... Inland Revenue Preparedness. Any Further Questions? Grant Robertson ... – PowerPoint PPT presentation

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Title: 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

4
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

5
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

6
How Will an Employee Become a Member?
7
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?

9
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

10
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

11
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

12
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

13
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?

14
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

15
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?

16
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

17
What will KiwiSaver Meanto the Financial
Services Industry?
  • Significant investment
  • Uncertain returns
  • Impact on existing business
  • Legislated timeframes
  • PIE (Tax changes)

18
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.

19
Important Next Steps
  • SSCWT decision
  • Appointment of Default providers
  • Public engagement
  • Employer engagement
  • Industry engagement
  • Inland Revenue Preparedness

20
Any Further Questions?
  • Grant Robertson
  • Head of Relationship Management
  • (04) 381 0647
  • Rodney Strong
  • KiwiSaver Product Manager
  • (04) 381 0590
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