KiwiSaver

More than 10,000 first-home buyers used their KiwiSaver savings to put down a deposit on a house in the year to March.

That’s about twice the 5737 who did so in the year to March 2012.

The total amount withdrawn from KiwiSaver accounts for first-home deposits was $120.2 million, eight times as much a was withdrawn in 2011.

Housing Minister Nick Smith the scheme was making home ownership more achievable. It reached its sixth anniversary at the weekend.

“My message to young people aspiring to own their own home is that KiwiSaver works. It is a very positive result that to date the initiative has provided $217.6m of people’s own savings and government grants towards the purchase of a first home.”

New rules, from tomorrow, require KiwiSaver providers to use consistent reporting methods to make it easier for savers to compare  schemes and boost investor confidence.

Commerce Minister Craig Foss said: “KiwiSaver schemes will have to report on fund performance, fees, asset allocation and other matters in a simple and standardised form. KiwiSaver providers will also need to publish the information in a consistent dataset that can be easily accessed.”

The first of the new statements will be published in October.

The FMA still isn’t saying which two KiwiSaver schemes were asked to change potentially misleading statements to investors or face court action.

But it has said why.

The first fund reportedly had inappropriate disclosure of past investment performance and asset allocation disclosures contained in advertising material.

The second had inappropriate disclosure of past investment performance and asset allocation disclosures.

Both will change the advertising material.

Rumours have been flying about which two schemes were targeted but so far none have been proved.

OnePath has had a positive response to its “plain English” KiwiSaver investment statement, says ANZ’s head of wealth and private banking, John Body.

He said there were a number of people with KiwiSaver accounts who could not explain exactly how the system worked. ‘

Many people who received the OnePath document responded well to the way it explained what funds were included and how investment gains, taxes and fees affected a KiwiSaver balance. The statement was awarded the WriteMark Plain English standard earlier this year.

It comes after two KiwiSaver providers were asked to change potentially misleading statements to investors or face court action by the Financial Markets Authority.

The FMA has reviewed 15 schemes’ public offer documents, including investment statements, prospectuses, financial statements and information on websites.

Others were found to be providing information in a way that was too vague for investors to comprehend the risks involved. In some cases, returns were being reported in different ways.

The FMA noted some schemes would have to change their reporting to avoid confusing people, such as in situations where returns were measuredly differently before and after the new requirements.

It did not disclose which providers had been spoken to but Body said  OnePath was not one of the schemes that had been warned.

He said effective disclosure was important because it could help people to understand what asset allocations they should be in. That would make KiwiSaver more effective.

“The risk I see around KiwiSaver is of people thinking ‘because I’m in KiwiSaver, I’ve got my retirement savings sorted out’.”

He said people should also be thinking about whether they were in the right sort of fund for their stage in life, and whether they had the capacity to contribute anything more to the scheme.

KiwiSaver should be adjusted so that money cannot be withdrawn in the event of any hardship, in order to clear up confusion about bankruptcies, says one provider.

The system is in the spotlight because the Official Assignee, part of the Insolvency and Trustee Service, has started High Court litigation to clarify its rights to withdraw money from KiwiSaver accounts when people are declared bankrupt.

It has taken $440,000 out of KiwiSaver accounts to repay the creditors of 165 bankrupts since KiwiSaver began, but most of those have been people aged 65 or older, whose funds are readily available.

A spokesman for the Ministry of Business, Innovation and Employment (MBIE) under which the ITS operates, said: “ITS is seeing an increasing number of bankrupts with KiwiSaver accounts. One of the ITS’ responsibilities is to realise a bankrupt’s assets to meet the claims of their creditors, and ITS considers KiwiSaver accounts an asset that should be available for creditors.”

But ITS has to use the financial hardship provisions in the KiwiSaver Act, and it is up to each KiwiSaver provider to consider early withdrawal applications on their merits.

It has been reported that most providers do not think they can open accounts up to ITS.

But Milton Jennings, the chief executive of Fidelity Life, said that, given that the KiwiSaver scheme was designed to pay hardship claims, it seemed fair that it should be used to pay creditors in bankruptcies.

“That is the flaw in the system, they should change it so that no hardship claims are payable and then all KiwiSaver funds should be protected from creditors until retirement. Once the funds are on call at retirement then creditors could have a go.”