The Financial Markets Authority (FMA) has
issued a consultation paper on the calculation of total fees to be
disclosed in KiwiSaver annual statements.
The FMA is seeking comments before providing a methodology
notice and/or guidance that prescribes how total fees should be
The consultation window is tight, with submissions due by
Friday 5 May 2017.
The consultation paper seeks feedback on proposals as to how
total fees should be calculated when they are disclosed in annual
statements provided to KiwiSaver members.The paper proposes a
"total annual fund charges" methodology (TAFC
methodology) for calculating total fees paid by an investor.
The TAFC methodology, if adopted, would be required to be followed
by providers to ensure consistency for comparison of fees.
The total fees figure for each investor is proposed to be
calculated as the individual investor's average balance
multiplied by actual total fund charges (as a percentage of average
net asset value, for the relevant accounting period) plus the
individual's action fees and other charges for the relevant
The TAFC methodology proposed tries to balance the requirements
for providing accurate information to KiwiSaver investors with not
imposing unnecessary compliance costs on KiwiSaver providers to
build new systems.
The consultation paper also briefly outlines an alternative
method that was considered by the FMA. The "Cent per
Unit" methodology is similar to that used to calculate PIE
income tax under the Income Tax Act 2007. Despite it being more
accurate, the FMA was concerned with the time it would take to
implement this system for KiwiSaver providers and the need to
back-fill data if the method was to be adopted. For this reason,
the Cent per Unit method was not favoured.
Further guidance to be given
The FMA is also considering guidance on the use of estimates
when calculating total fees. The guidance to be provided in this
regard is intended to look similar to the FMA's existing
Fee Disclosure by Managed Funds guidance.
The FMA expects the new regulations on disclosure of total fees
for KiwiSaver annual statements to become effective later this
month. Following the consultation period for the latest
consultation document, a draft methodology notice as to how total
fees should be calculated (and/or draft guidance regarding use of
estimates in the calculation) is expected in May or June, with the
expected issue of a finalised notice and/or guidance in the period
from June to August this year.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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