Merran Keil Barrister
Merrran_Keil_Banner.jpg

News

The latest articles written by Merran

Comparing apples – Kiwisaver fees

New Zealand Financial Markets Authority Consults On Methodology Notice and Draft Guidance To Help KiwiSaver Scheme Providers Calculate The Total Fees Charged To Each Investor

 1.       The New Zealand Financial Markets Authority (FMA) has issued the following documents for consultation:

2.       Submissions need to be made by 23 June 2017.

3.       The Notice and Guidance Note deal with the FMA’s proposal to issue a methodology notice (Notice) to help KiwiSaver scheme providers calculate the total fees charged to each investor.

4.       The FMA seeks feedback on:

  • the draft Notice
  • the draft amendments to the 2016 Guidance note – Fee disclosure by managed funds as set out in the Guidance Note.

5.       Key points made in the Notice and Guidance Note include:

  • The FMA will give KiwiSaver scheme providers the option to use either a cent per unit formula (CPU methodology) or a total annual fees calculation (TAFC methodology) to calculate total fees;
  • The FMA prefers the CPU methodology as it is more accurate. However, if providers don’t have enough time to adapt their systems, they can use the TAFC methodology;
  • The FMA originally preferred the TAFC methodology as the FMA was concerned about whether providers would have enough time to implement the CPU methodology before their 2018 annual statements were due. However, some providers told the FMA they could use the CPU methodology, and said they could implement it by March 2018;
  • The FMA will review the methodology notice within the next five years. Over that time the FMA e will decide whether all providers should use the CPU methodology only;
  • The Notice will not apply if KiwiSaver scheme providers can calculate the actual fees charged to each investor for the relevant period;
  • The FMA is strongly encouraging providers to also show fees as percentages on members’ annual statements. Seeing both a dollar amount and a percentage value means they can compare the impact of the fees on their funds over time, year on year.
Colin McAlpine