Traditional superannuation schemes remain a “solid and reliable” part of the NZ retirement savings sector, delegates at the recent Financial Services Council/Workplace Savings NZ (FSC) conference heard.
Gavin Quigan, Financial Markets Authority (FMA) KiwiSaver and superannuation manager, told the FSC conference this month that the traditional retirement savings sector still accounts for about $24.5 billion – or about half of the KiwiSaver market – managed on behalf of 310,000 members almost two years into a tough new regulatory environment.
Quigan said the non-KiwiSaver super industry – which includes employer, retail and master trust schemes – has fallen off less than expected since the Financial Markets Conduct Act (FMC) came into force late in 2016.
Over the previous 12 months just five traditional super schemes have closed with 110 still operating. According to Quigan, the super universe includes 90 restricted schemes – such as employer, industry or faith-based funds – of which 22 remained open to new members.
The restricted market covers 40 defined benefit (DB) schemes (with just one open), which face some technical difficulties in closing or merging.
However, Quigan said a handful of smaller schemes were looking to close over the coming months with recent exemptions granted to “three big master trusts” to accept non-employee members offering more options to transition.
As at June 30 this year the superannuation master trust market recorded about $7.9 billion under management, data from consultancy firm Eriksen and Associates shows. The NZ master trust sector – dominated by AMP ($3.2 billion), SuperLife ($2 billion) and ASB ($1.4 billion) – grew almost $300 million over the June quarter and was up about $1.5 billion compared to two year’s previously – just before the FMC compliance deadline.
The government was also working to ease compliance pressure for the traditional super industry under a regulatory “right-sizing” initiative, Quigan said.
Under the right-sizing program, government and regulators were considering a range of measures to iron out some of the main FMC compliance issues facing super schemes two years into the regime.
For example, a review of the double-custody audit quirk that hits restricted schemes under FMC is already underway in a process that could save about $500,000 in fees across the industry.
But the right-sizing effort includes a ‘wish list’ of other items including exemptions for schemes to provide fund updates, product disclosure statements as well as quarterly and annual reports. Other out-size issues on the list include insolvency and life insurance tax compliance rules.
Some of the changes would require law reform while FMA exemptions or guidance could resolve others.
Quigan said despite the increased regulation and rise of KiwiSaver, the traditional super industry would be an important component of the NZ retirement savings effort for some time to come.