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An Operational Viewpoint

Who are Jacques Martin?. BPO Organisation specialising in the administration of financial services products for over 350,000 New Zealanders Superannuation administration >50% of our business Act on behalf of >20 clients administering 50 superannuation schemesInteractions to >1,500 employersTOWER

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An Operational Viewpoint

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    1. An Operational Viewpoint

    2. Who are Jacques Martin? BPO Organisation specialising in the administration of financial services products for over 350,000 New Zealanders Superannuation administration >50% of our business Act on behalf of >20 clients administering 50 superannuation schemes Interactions to >1,500 employers TOWER’s administration partner for TOWER’s KiwiSaver product

    3. Presentation Overview What is KiwiSaver An Employee’s View Choice of Provider Options and Impacts for Existing Schemes Role of the Employer Impact on the Financial Services Industry Important Next Steps

    4. What is KiwiSaver? 27 August 2006 “I think KiwiSaver is going to be a mess.” Michael Littlewood, co-director of the Retirement Policy & Research Centre 28 August 2006 “A state of the art, elegant, simple yet effective retirement savings scheme.” Jonathan Eriksen, Eriksen & Associates Ltd

    5. KiwiSaver – a High-level Overview Government initiative commencing 1 July 2007 to help New Zealanders financially prepare for retirement Centrally administered by the IRD Multiple Providers with the same core rules Smaller set of Default Providers Opt out scheme for new employees aged >18 years Opt in for existing employees

    6. How Will an Employee Become a Member?

    7. The Employee Trade-off Maintain existing salary position v Contributions will be deducted from their first pay at the rate of 4% (default rate) or 8% To get: $1,000 kick start Government contribution Government Fee subsidy Employer contributions up to 4% are SSCWT free First home purchase scheme

    8. Choice of Provider How should the employee choose: Choose a Default Provider Choose an alternative Approved Provider Leave it to the Employer Leave it to the IRD What happens if I have existing superannuation arrangements? What role should the employer play?

    9. What Happens if I Have Existing Superannuation Arrangements? 5 July 2006 “It is recognised and accepted that there is likely to be some rationalisation/consolidation of the industry products and providers in response to the introduction of KiwiSaver.” Officials’ Report on the KiwiSaver Bill

    10. Options for Existing Schemes Become an Approved KiwiSaver Scheme Introduce a KiwiSaver section to your existing scheme Apply to become an exempt employer Wind up

    11. Options for Existing Schemes An Approved KiwiSaver Scheme New scheme or conversion of existing scheme to KiwiSaver scheme (member consent required) Must meet the core criteria of a KiwiSaver scheme e.g. lock-in Introduce a KiwiSaver section New section of existing scheme (no impact to existing members) Effectively two schemes sharing one Trust Deed Employees can potentially be a member of both schemes

    12. Options for Existing Schemes Apply to become an exempt employer Scheme or schemes must meet the core criteria of KiwiSaver Exempts employers from automatic enrolment obligation Employees can still opt in to KiwiSaver Wind up Trustees decision that existing scheme does not meet the members’ best interests post-KiwiSaver

    13. Choice of Provider How should the employee choose: Choose a Default Provider Choose an alternative Approved Provider Leave it to the Employer Leave it to the IRD What happens if I have existing superannuation arrangements? What role should the employer play?

    14. Role of the Employer Mandatory administrative obligations Employers must provide an information pack to new employees within 7 days of commencing employment Supply new employee details to IRD with the next EMS Commence deducting contributions immediately Receive advise from IRD to stop contributions

    15. How Far Should an Employer Go? Hands off or hands on? Will the Employer choose a Preferred Scheme? Will the Employer seek a channel for advice to members? What will the Employers approach to SSCWT be?

    16. When is the Right Time for an Employer to Decide? "Our strategy is to wait to see what the Government comes up with before we finalise our own." Peter Merry, Executive General Manager for Human Resources, Fletcher Building

    17. What will KiwiSaver Mean to the Financial Services Industry? Significant investment Uncertain returns Impact on existing business Legislated timeframes PIE (Tax changes)

    18. Operational Challenges for Providers Project commencement pre-dates legislation Resource capacity Capacity requirements Alignment with Inland Revenue Mortgage diversion February 2006 “mortgage diversion is unworkable and too complex” Report on Cabinet agreement on mortgage diversion.

    19. Important Next Steps SSCWT decision Appointment of Default providers Public engagement Employer engagement Industry engagement Inland Revenue Preparedness

    20. Any Further Questions? Grant Robertson Head of Relationship Management (04) 381 0647 Rodney Strong KiwiSaver Product Manager (04) 381 0590

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