There are a number of critical issues that have the potential to mould its future shape will require careful and considered responses. Responding to these issues will stretch the resources of the industry, certainly throughout the first quarter of 2004.
The issues are varied. Here is a summary on their main points.
1. Taxation of Non-controlled Offshore Investment The outcome of the officials paper on taxing offshore investments could result either in the creation of an ad hoc fix applying only to offshore investments, or could become the catalyst for a total change to taxation of managed investments.
For ISI the key criteria against which any changes will be measured include:
In many respects it is crazy that such important radical options are being considered within such a short and highly pressured timeframe. However, the industry views the officials’ paper not simply as a method to address the “revenue hole” arising in respect of offshore investments but as a unique opportunity to achieve the major tax reforms that it has been seeking for a long time.
2. Life Insurance Act 1908 – Review
In four years the existing Act will celebrate its centenary. It is amazing that the legislation which governs life insurance assets totalling $8 billion should be so out of date.
ISI has called for this review and has commenced work on its submission to the Law Commission’s discussion paper.
The future design of legislation governing the life industry is central to the future of life companies. There will be several stages to this project, responding to the Law Commission paper, then responding to resultant government proposals– this review will engage our attention for a considerable period.
3. IRD Discussion Paper on Income Protection Policies
We are awaiting the release by the IRD of a discussion document addressing perceived inconsistencies in the taxation of income protection policies, and concerns the IRD have in the collection of taxation on taxable claim benefits.
Given that income protection is the fastest growing risk product line, the outcomes of the IRD review will be of significance to both product providers and advisers.
4. Industry Response to PRG Report 2003
The Periodic Review Group report released last year departs from previous reports, and has not found favour in all quarters. Among other things, it has adopted an approach of developing a series of specific recommendations that form an ongoing work programme.
It starts from the premise that New Zealand does have a personal savings problem, that we face demographic pressure, that the position of those currently retired or approaching retirement is adequately covered (in any event it is too late to change that position) but that the future for those under age 50 is less clear and less secure.
The report contains no major initiatives or changes of direction. Rather, it contains specific recommendations in the form of a work programme for the government and the industry to implement over the next three years. PRG 2003 takes the view that progress can be best achieved by a series of incremental gains towards a goal of increased personal savings rather than big changes that may be difficult to implement in the MMP political environment.
The challenge for the industry is to respond to the report, seek out the areas where it can work towards implementing recommendations and to encourage wider public debate in respect of others.
The report provides the opportunity for ongoing work and progress, not the stop/start six yearly cycle of previous PRG reports, but it will require industry effort to maintain forward momentum.
5. Investment adviser regulation
This is a hardy annual that will reach a decision point later in the year when the Commerce Minister, Lianne Dalziel, is expected to release a discussion document.
The interests of ISI members and investment advisers are closely intertwined. Building the confidence and trust of the public and regulators in investment advice is essential to our success. ISI has a working group that is considering how progress can be achieved and plans to prepare a paper for the minister and officials. We will be seeking to work closely with FPIA and other investment adviser bodies to identify the best options.
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Vance Arkinstall is the chief executive of the Investment Savings & Insurance Association.
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