KEY POINTS:
THE GOOD, THE BAD ... AND THE BUDGET
The Budget didn't produce fireworks for investors this year, unlike last year's KiwiSaver and Portfolio Investment Entity (PIE) announcements.
But the personal tax bracket changes have some worried that low- and middle-income investors will have even less incentive to
invest in KiwiSaver in years to come.
Under the present tax regime those who earn up to $9500 are taxed at 15 per cent and income between $9500 and $38,000 is taxed 21 per cent.
People who put money into KiwiSaver and other PIE investment fund and who earn under $38,000 are at present taxed at 19.5 per cent.
Once the full tax bracket changes are introduced in April 2011 those earning up to $20,000 will be taxed at 12.5 per cent and income earned between $20,001 and $42,500 will be taxed at 21 per cent.
Bernie O'Brien, head of Mercer New Zealand, one of the six default KiwiSaver providers, says unless the PIE rate is changed some investors will be paying more tax on their savings than on their income.
While this is now the case for those who earn under $9500 he says it is unlikely anyone who earns such a low amount will be investing in KiwiSaver.
But once the brackets creep up they are likely to take in more and more low- to middle-income earners who may also want to join KiwiSaver.
O'Brien suggests cutting the tax rate on PIEs to 17.5 per cent may be the answer and says at the least the Government needs to tweak its other taxes to bring them in-line with the changes.
But not all are worried about the tax cuts.
Phillips Fox partner Sue Brown says the changes may be good news for older people who rely on their investments for income.
Currently low-income earners are taxed at lower rates for salary or wages but have to pay higher tax for investment income.
Under the new regime by 2011 investors will pay only 12.5 per cent tax on the first $20,000 of earned income and 21 per cent on income between $20,001 and $42,500, whether they earn it from salary, wages or investments.
ANZ COMPLAINTS ROLL IN
The Banking Ombudsman has received around 20 official complaints from ANZ customers who were advised by the bank to invest in ING's troubled CDO funds and says further complaints are expected.
ING, which is half-owned by the ANZ, froze redemptions on its Diversified Yield Fund and Regular Income Fund in March, leaving 8000 investors in the lurch.
Many investors were elderly and have said they were told investing in the funds was "as safe as the bank".
But the complicated products invested in securitised loans which have been hit by a lack of trading in the debt markets following the US credit crunch.
Banking Ombudsman Liz Brown says she is in the process of researching the nature of the products and how they were sold and is hoping to issue her first assessment of a complaint in the next three to four weeks.
Some of the complaints must also go back to the ANZ before they can be dealt with by the Ombudsman as under legislation complaints must be made to the bank first.
But the Herald understands the ANZ may have already settled some complaints to prevent them from going further.
An industry insider says he had heard of one complaint where the ANZ had paid out over $5000.
But the ANZ is staying mum. A spokeswoman for the company says it is still working with customers and won't be making any comments at this stage.
The ING funds remain frozen and no timeframe has been given on when investors may be allowed to take their money out again.
MOVING ON
Mint Asset Management is the latest fund manager to lose a key staff member in a year which has seen a big shake-out in the industry.
Mark Ford, one of Mint's founders, is leaving the business for personal reasons, just over two years after launching Mint with co-founder Rebecca Thomas.
Both Thomas and Ford previously worked at ING and left in 2006 to set up the boutique firm.
Ford's departure follows several other shake-outs in the industry.
Probably the most talked about one was Warren Couillault's sudden departure from Fisher Funds in February amid talk of a rift between himself and principal Carmel Fisher.
Couillault has a restraint of trade agreement stopping him from working in the industry until February next year and is said to be travelling overseas and making the most of his "enforced holiday".
Less well-known to those not in the industry was the closure of boutique Walker Capital Management in early February.
Principal Stephen Walker shut up shop and joined Goldman Sachs JBWere as head of asset management.
At the time he would not discuss his reasons as he said he had already signed up with Goldmans and under their contract he was not allowed to speak to the media without training.
But industry sources say difficult market conditions were a key factor.
At the same time Brook Asset Management was bought out by its 49 per cent stakeholder Macquarie Bank, seeing the departure of fund manager Andrew South who is also said to have gone travelling.
Even the Government's New Zealand Superannuation Fund has not been immune to change with its decision to restructure out the position of chief investment officer Paul Dyer.
It's natural in any industry to have churn but even those within the industry have noticed that it is higher than normal.
The past six months have probably been the toughest for the industry in the past 10 years so perhaps it's no surprise there are moves afoot.
RATING THE RATERS
A new KiwiSaver ratings section on NZX raises the question of who will be rating the KiwiSaver funds that the NZX itself runs. While the ratings are being carried out by FundSource - a specialist research house - FundSource is also owned by the NZX.
The NZX has three KiwiSaver funds, its Smartshares Conservative, Balanced and Growth portfolios.
FundSource spokeswoman Leonie Gordon says its won't be rating the funds at this stage and whether it does so in the future is "still up for discussion".
"There are obviously issues there around conflict of interest."
In the past FundSource has rated the funds but only on a quantitative or performance basis.
But the new rating system launched by the NZX yesterday also takes into account the qualitative factors such as who is running the fund, how stable the team is and whether they have a good strategy in place.
The Smartshares funds are run on a passive strategy.
Gordon says FundSource expects to make a decision in the next couple of months as to how it will handle the rating of passive KiwiSaver funds of which there is only a handful.
