by Jenha White
He explores this in A White Paper, saying New Zealand obviously requires such products to be designed, built and available in order to provide choice in retirement, especially with the popularity of KiwiSaver which provides scheme members with a lump sum at the age of retirement.
ING head of KiwiSaver distribution David Boyle says the advice industry should be having big discussions about this issue as it will be stretched to deal with demand.
He says ING has around 13,000 customers that could take their money out from July 2012 and that might be funds worth $500 million.
Retirement Income Stream products are readily available in most Western countries and can be in the form of:
Hensley believes the New Zealand market requires a series of Allocated Pension type products. He says doing so would require the government to make a tax change to ensure tax free status of investment returns, legislative requirements for enforcement of low management fees (suggested approx 90 basis points) and legislative requirements to set minimum percentage drawdown.
He says Allocated Pension products would also need to assume consumption of capital, have switching between funds permitted within reason and for scheme managers to supply choice of investment strategy including a cash or term deposit option.
Hensley also supports the use of a collective investment vehicle to promote retirement savings, though says these should meet the minimum requirements set by the government-mandated KiwiSaver scheme.
Jenha is a TPL staff reporter. jenha@tarawera.co.nz
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And allowing scheme managers to provide a deposit option? If investors want a deposit option isn't the best advice for them to take their money, pop down to the bank of their choice and negotiate a deposit? Why pay a 0.90% fee to an intermediary where no intermediation is required? With a 6 month deposit rate of about 4.5%, the intermediary's fee is 20% of the return!