KEY POINTS:
The new National-led Government has moved quickly to propose closing a glaring gap in its pre-election KiwiSaver plans but it looks to be a costly decision.
Yesterday Prime Minister John Key said the Government would be looking to introduce its new KiwiSaver legislation this week and it would
include changes to make it more equitable to low income earners.
Prior to the election National promised it would lower the minimum contribution rate for KiwiSaver to 2 per cent.
But the proposal came under fire because it also meant those earning under $52,000 and only contributing 2 per cent would miss out on the matched Government contribution of $1043 per year.
Key has now said it will amend its plans although it will end up costing an extra $700 million over five years.
The cuts to KiwiSaver were designed to allow National to give bigger tax breaks and one wonders what will have to go in its stead.
The next few weeks will reveal the details as the Government push it through Parliament under urgency as part of its 100-day plan.
Other KiwiSaver changes include employers having to foot the bill for their contribution rather than getting a tax credit from the Government but will only have to contribute up to 2 per cent.
The 2 per cent level will kick in from April 1 next year and will stay at that level.
Under Labour it would have kept increasing by 1 per cent per year until April 2011 where it would have been capped at 4 per cent.
National has also promised a reversal of the so-called "Mallard amendment" to the Employment Relations Act. The Mallard amendment forbids employers from giving non-KiwiSaver employees a pay rise to match the contributions they are making to KiwiSavers.
Former Labour Minister Trevor Mallard said he wanted KiwiSavers to be in a preferential position.
However National has said it would allow the forbidden arrangements to occur, "if they are negotiated between employers and employees in good faith, and if employers are fulfilling all their obligations to make KiwiSaver contributions".
It would also amend the KiwiSaver Act to "ensure that when an employee joins KiwiSaver, the compulsory contribution from their employer is a genuine addition to their normal pay".
But exactly how that would be done is about as clear as mud.
MORE BAD NEWS
Investors in ING's frozen funds face more bad news as the value of their investment continues to plummet.
ING suspended withdrawals from its Diversified Yield and Regular Income funds in March this year leaving around 8000 investors with $521 million stranded.
In a recent update to financial advisers ING has admitted the value of the funds has fallen even further in the last month.
According to financial adviser industry website Goodreturns.co.nz the value of the Diversified Yield Fund fell 25.16 per cent and the Regular Income Fund dropped 27.97 per cent in November.
The drop has seen unit prices for the two funds also fall away. As of yesterday the Yield fund was down to 41c and the income fund was down to 33c.
When the funds first froze their unit prices were 81.05c and 70.5c respectively, down from the $1 issue price.
ING chief investment officer Phillip Houghton-Brown said the falls had come after financial instability rose to new extremes in October following the bailout of more troubled US financial institutions.
That saw investors flee to less risk-adverse areas and because the funds are invested in illiquid structured credit products that exacerbated the problem.
Houghton-Brown said because of the way security prices came through, the October figures were not reflected in the funds' unit prices until November and the December unit prices were only now beginning to reflect the November problems.
The failure of ING to come up with a plan to address the problem so far has left some advisers furious and there is talk of a joint effort to confront the company over its lack of action. Investors, many of whom are elderly ANZ bank clients, are also anxiously waiting to hear what will happen to their money.
Steven Giannoulis, ING's general manager marketing and client services said ING was still looking at options for investors in the frozen funds and was looking to get an update to investors in the next few weeks.
But the update would be more of where the funds are at given that the markets have moved significantly, rather than a solution to the frozen funds problem.
The ING situation makes what is being offered to finance company investors look attractive.
At least they are being offered a plan.
NEW BOSS
ING is also understood to be looking out for a new boss to head up its fund management arm.
Funds Focus understands internal applications closed on Friday for the newly created position and several people are likely to have put their hands up for the job.
Those thought to be interested include current chief investment officer Phillip Houghton-Brown and chief financial officer Paul Butler. ING is known for making appointments internally and new chief executive Helen Troup may also be looking to her former stomping ground in Australia for potential recruits.
One possibility is New Zealander David McClatchy who is currently heading up the Australian investment management division of ING.
Giannoulis said appointing a new head of fund management was just one of the ideas being discussed by the business as part of a wider plan for refocusing the fund management arm.
"We are looking at some options about how to take the business forward."
But he said a new appointment was far from confirmed and ING would make a formal announcement if and when it did happen.
The new position is not likely to be an easy one.
JUST SUPER
An Australian superannuation fund has taken an unprecedented step by pledging not to raise fees for two years in a bid to provide great certainty to its members in the wake of the financial volatility.
Super funds around the world have been hit hard by the financial crisis this year, including those in New Zealand.
In Australia funds have posted their worst returns in the 16-year history of compulsory super with a median average return of negative 6.4 per cent.
But Hostplus, the super fund for workers in the tourism, hospitality and recreation area has said it will guarantee its fees until 2011. It's the first time a super fund has made such a pledge, according to news agency AAP.
The fee moratorium applies to the fund's core and personal products, through which members are charged a flat member fee of A$1.50 ($1.83) a week, a level that was first introduced in December 2004.
In New Zealand KiwiSaver fees are monitored under a tight regime. All fee changes have to be approved by the Government actuary and fund providers have been warned to keep fees to a minimum. The Government also gives those in KiwiSaver a fee subsidy of up to $40 per person per year.
