Presentation to the 2012 Financial Services Council AGM

1. Presentation to the 2012 Financial Services Council AGM The FSC’s Work Programme for the Year Ahead by Peter Neilson, CEO, Financial Services Council 4.30pm Wednesday 5 December 2012 The Mercure Hotel 8 Customs St Auckland

2. Key programme objectives for FSC over the next 4 years: • The FSC and its membership is recognised as the organisation that must be consulted by politicians and their advisors before policy change is contemplated in the areas of funds management, KiwiSaver, insurance relating to people and financial advice policy. • Achieve a significantly higher level of engagement and commitment from members of the FSC reflected in activity on FSC policy and advisory committees, financial support for projects and member companies actively supporting FSC policy initiatives. • By 2015, have the FSC include within its membership over 90 percent of the financial services industry value chain. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 2

3. Key programme objectives for FSC over the next 4 years: • Achieve a commitment from a majority of the parties represented in Parliament to raise the contribution rate for KiwiSaver to achieve an adequate income in retirement from 65 with the aim of having all employees saving for retirement. • Widespread recognition that adequate insurance is a major threat to the resilience of New Zealanders and an industry/Government agreement about how that under-insurance should be addressed. • Make a measurable contribution to programmes, including those of the FMA and/or the Commission for Financial Literacy and Retirement income, for improving the level of financial literacy in NZ. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 3

4. We are Engaging More Widely and Deeply With Our Members • We now have two FSC Policy Committees: • Managed Investment Funds and KiwiSaver Policy Committee • Which oversees our work on Retirement Incomes Policy: • Getting the under 45 to join KiwiSaver and tick the box for 8% + 2% = 10% contributions. • Encouraging the baby boomers who will retire over the next 20 years to boost their retirement savings. • Life Insurance and Advice Policy Committee • Which has overseen the preparation for release of the insurance gap reports with the aim of: • Encouraging middle New Zealand that income protection insurance is a must have, not a nice to have. • Providing practical advice for New Zealanders trying to work out what they need with respect to personal insurance. • The LIAP Committee is also looking to: • Develop guidelines for industry on providing insurance for those living with mental illness. • Address the viability of our distribution models. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 4

5. Strategic Tax Issues: • The future of the PIE regime. • Tax biases that adversely affect intermediated financial products that involve compound interest because of their long term focus. • Tax impediments for decumulation products. • Principles of Sustainable Insurance: • Rolling out a work programme for the FSC. • Our Life Insurance Statistics: • Coverage has been improved with Partners Life joining the FSC. • We are investigating the possibility of adding claims paid and settled to our statistics. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 5

6. Working with other Kindred Organisations • We already work closely on submissions where we share common objectives. • There are other opportunities for co-operation in order to: • Share costs and reduce overheads. • Bring broader coalition of support together. • An area where co-operation is most likely to occur relates to projects, for example: • The HFA shares an interest with us in the likely implications of an aging population and increased longevity for both KiwiSaver and Health Insurance. We also share an interest in the viability of our distribution chains. • ICNZ is currently busy dealing with issues arising from the Christchurch earthquakes but they are likely to share an interest in our insurance gap work. • The Agent and Broker organisations are likely to be interested in our work on the viability of distribution channels. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 6

7. Opportunities for the FSC in 2013 • December 2012 – The conference Affording the Future is expected to see the initial outcomes of the Long Term Fiscal Projections review undertaken by the Treasury utilising an external reference group. • The likely outcome will be advice that the current commitments of Government cannot be maintained over the next 40 years and either taxes will need to rise or expenditure to drop if debt levels are not to grow to unsustainable levels • Prefunding retirement incomes from increased savings is likely to be an option that will be in line with our own KiwiSaver project findings. • January 2013 – FSC launches the Infometrics Report on the Impact of KiwiSaver on first home buyers, investment into growing New Zealand companies and the potential size of investment if we step up coverage and contributions. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 7

8. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. • Opportunities for the FSC in 2013 • February 2013 – FSC Launches its Insurance Gap Reports and starts campaigning for New Zealanders to make income protection insurance a must have, rather than a nice to have. • March 2013 – The FSC is talking to the Party Leaders to see if there is support for holding a cross party seminar on retirement income policy issues in the first Parliamentary recess next year. • April 2013 – Contributions to KiwiSaver go from 2 to 3% for employees and employers. FSC will suggest that we should increase contributions by 1% a year until everyone is saving 10% of their income each year. 8

9. Opportunities for the FSC in 2013 • April to September 2013 – The Office of the Retirement Commissioner undertakes the 3 yearly review of retirement income policy. • FSC will participate and promote the recommendations from Pensions for the Twenty First Century: Retirement Income Security for Younger New Zealanders. • Throughout 2013 – FSC members will meet with potential political decision makers from across the Parties likely to be represented in the next Parliament to discuss: • The insurance gap and what can be done about it. • The benefits from increasing coverage and contribution rates into KiwiSaver. • The benefits to KiwiSavers and New Zealand of moving default investors balances into life stage appropriate investment portfolios. What the Report is Not About How we will provide retirement incomes in the next 20 years so if you are already retired or soon will be, it is not about you. Relitigating the debate about National Savings. 9