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Commission's comments bemuse industry

Bemusement from the superannuation industry has greeted a Securities Commission claim that firms are spending more money than they need to on prospectuses for employer-based superannuation schemes.

Monday, June 30th 2003, 7:46AM

by Rob Hosking

A government proposal to remove the requirement for such schemes to issue prospectuses, contained in the latest Business Law Reform Bill, has been opposed by the commission.

As reported in SuperTalk, the commission advised the government that, after a scheme is set up, the prospectus does not need to be an expensive glossy document. It need only be available on request, and can be incorporated in an annual report or published electronically.

“We are not aware of how many scheme trustees have taken these opportunities to save costs.”

The implication that firms are splashing on glossy prospectuses has puzzled the industry.

“No employer produces a glossy prospectus and no employer would think of including the information on the annual report as this would simply drive the costs up even further (due to the huge amount of extra paper that would end up in the bin!),” Watson Wyatt’s Jill Spooner says.

Spooner, who is also a council member of the Association of Superannuation Funds of New Zealand, (ASFONZ), says that this would also delay the annual reporting cycle, because of the need to complete the extra paperwork to have the prospectus registered.

The commission’s comments have been seen as an indication it is out of touch with how such schemes are actually administered.

ASFONZ has calculated that the averaged annual direct cost is between $5000 and $10,000 a year, with indirect costs on top of that.

It has also surveyed its members over whether people are asking for prospectuses. Very few requests have been made, and these have mostly come from solicitors doing due diligence on a firm. One other request has been logged – from a scheme member who was also a member of the Securities Commission.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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