New savings scheme will prompt other changes

Employees will be automatically registered in a scheme when they take up a new job, unless they choose to opt out.

The fear employers have of being caught in an investment adviser role, plus other red tape associated with superannuation schemes, means the government will have to look at several other law changes, the working group has recommended.

There is considerable “regulatory overlap” in this area, the report says.

“As well as being subject to a range of consumer protection legislation and the disclosure-based regime prescribed in the securities legislation, registered schemes are governed by the Superannuation Schemes Act.”

That requirement imposes a number of other disclosure obligations, and also requires that a scheme be established “principally for the purpose of providing retirement benefits”.

“This is inappropriate where there are no tax or other incentives justifying a restrictive ‘lock-in’,” says the report. “It can disincentivise new members from joining.”

The act also includes restrictions on transfers between schemes – a major issue for workplace superannuation.

Other difficulties are with disclosure requirements under the Securities Act, which the report says are both “overly detailed” and “too generic”.

The group cites anecdotal evidence from the recently launched State Sector Retirement Savings Scheme to support this.

The group recommends looking at allowing schemes to either provide investment statements or “a suitably focussed product disclosure statement of the kind already contemplated in the Superannuation Schemes Act”.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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