KiwiSaver docs still too hard
New rules have shortened the documentation that KiwiSaver providers give investors – but it has not become any easier to understand.
As part of the Financial Markets Conduct Act changes, fund managers, including KiwiSaver providers, are now required to provide shorter and more templated product disclosure statements.
For many investors, these are their main source of information about the funds – covering issues such as where money is invested, the risk, fees and taxes. The new rules were meant to cut down the amount of unnecessary data investors were given, which could make it harder for them to access the relevant information.
Research by associate professor Aaron Gilbert and Ayesha Scott at the AUT University Business School’s department of finance shows that on average, these new statements are significantly shorter and contain simpler language than the prospectuses and investment statements they replaced.
But even the simplified product disclosure statements require a high level of literacy.
The documents were an average of 16 pages compared with more than 50 previously, Scott said.
But understanding the 100 financerelated terms required university-entry level education, she said.
KiwiSaver was a mass-market product, she said, so it was potentially a con- cern if the information was not accessible.
Given the uncertainty around the future of national superannuation, KiwiSaver would become a major component of retirement planning, Gilbert said.
‘‘Because it is so important and because small decisions made today can have a huge impact 30 or 40 years from now in terms of how much money people have to retire on, it’s really important people are making good decisions when it comes to their KiwiSaver.
‘‘The first step in making those good decisions is to get people actively seeking information.’’
Gilbert and Scott compared the last prospectus produced by 21 KiwiSaver providers with their new simplified disclosure documents to provide a before and after snapshot of the effect of the regulation.
A number of measures were used to evaluate the readability of the documents including the complexity of the language and the number of specialist financial terms included.
The next stage of the research is to get people to read the product disclosure statements to see what impact the simplified documents have and try to figure out where improvements can be made.