The savings and investment industry has been hit with a $10-million-a-month bill to manage information system changes resulting from KiwiSaver and related tax changes, says Vance Arkinstall, head of the Investment, Savings and Insurance Association (ISI).
Crucial figures on which to base system changes — such as tax rates and the distribution of tax between the parties involved in the KiwiSaver scheme — are still lacking, despite KiwiSaver being due to start on July 1.
However, Arkinstall insists the position is not as dire as that portrayed by some media reports.
“Some of them suggest KiwiSaver is on a rocky road. We don’t share their level of concern,” he says. The association is working with tax officials and is confident that the right answers will come through in time. However, Arkinstall concedes “it will be a very tight timetable”.
IT departments in participating investment organisations and insurers, and the software companies serving them, “need technical answers to build systems” and they do not have them yet, says Arkinstall. The organisations are “using a variety of off-the-shelf and home-built systems”, and thus will depend, in some cases, on their own IT departments, while others will look to packaged software providers.
A “default provider” for the KiwiSaver scheme such as AMP “needs software for a registry system for individual holdings, a tool to electronically communicate with IRD, and a web interface for customers to view their information,” says Roger Perry, AMP’s general manager of savings and investment.
“We’re confident in the ability of the technology to be able to deliver on time,” he says. “Having said that, there are a number of issues we’re currently working through with IRD. Our intention is that we start testing in May. That will be a critical time, when we’ll see how well IRD’s and AMP’s technology work together.
“The more information we receive now the better. That will help us with our processes, and to meet our obligations. Currently, it seems the information is limited.”
To ensure KiwiSaver is launched on time, providers like AMP have to collect some of the missing information directly from intending members of the scheme.
“This does add to the cost a little,” says Perry.
Jason Tong, chief operating officer for the Asia-Pacific region of Bravura, a software provider to investment and insurance houses, says working with the vagaries of legislation-driven change is “a fairly normal environment for us. We have a lot of experience of dealing with [such] changes in New Zealand and Australia.”
The company has an established set of processes, which involve close contact with its clients and the tax authorities, he says.
Bravura thinks it has enough information on KiwiSaver to proceed to implementation with the necessary software, although there is always the possibility of last-minute changes, says Tong.
The modules related specifically to KiwiSaver are ready to be supplied to clients later this month, he says. But the Portfolio Investment Entity (PIE) rules under which the savings scheme will operate “are a different matter”, he says. Here, there are still some undecided issues, but these should be sorted out in time for a May release of the software.
“The first release will be almost all of KiwiSaver and most of PIE. The May release will have the rest of PIE.”