Questions and Answers

Transcription

1 Page 1 Questions and Answers Proposed changes to the BNZOPA scheme. Recently, members and pensioners will each have received a letter about proposed changes to the Bank of New Zealand Officers Provident Association (BNZOPA) that are being considered by Bank of New Zealand (the Bank) and the BNZOPA Board of Management (Board or Board of Management). Why is the Bank making changes? The Financial Markets Conduct Act 2013, which took full effect in 2016, has increased the regulatory requirements for workplace savings schemes like the BNZOPA. Because of this, the Bank and the Board seek more sustainable workplace savings arrangements for members while not disadvantaging pensioners. What are the proposed changes? There are two groups in the BNZOPA: pensioners (the smaller group), each of whom is receiving a pension from the BNZOPA; and members (the larger group), each of whom will receive a lump sum payment from the BNZOPA when they leave the scheme. As the proposed changes mainly relate to members, here we explain those changes first. MEMBERS What are the changes for members? The Bank intends to establish a new workplace savings scheme for members, which retains all the member benefits of the BNZOPA but offers more investment choice, the same or lower fees and improved member services 1. Though modelled in structural terms on the BNZ KiwiSaver Scheme (BNZ KiwiSaver), including as to investment options and member services, the new Bank scheme will not be a KiwiSaver scheme. Like the BNZOPA, it will be a flexible and completely separate workplace savings scheme. A framework for undertaking this change is being prepared. By the end of 2018, the Bank intends seeking consent from the Financial Markets Authority (FMA), which regulates workplace savings schemes, to transfer all members and their entitlement balances to the new Bank scheme in This transfer will not require consents from either members or pensioners, and there is nothing that either members or pensioners need do in order for the transfer to occur. 1 As the new scheme has yet to be established, it is not yet possible to join or contribute. Any membership offers, when made, will accord with the Financial Markets Conduct Act 2013.

2 Page 2 Does the Board of Management support the proposed changes? Based on the information provided to date, and subject to the FMA requirements being met (these include that the terms and conditions of the new scheme are no less favourable to any transferred member and that the transfer is otherwise reasonable in all the circumstances), as issuer of the BNZOPA the Board supports the Bank s proposal to transfer all members to the new Bank scheme. The Board also supports the changes that are proposed for the pensioner-only BNZOPA following the transfer of all members to the new scheme (assuming the FMA consents to the transfer) - see the questions and answers under Pensioners below. Have the necessary FMA approvals been obtained? Not yet. However: the Bank has engaged with the FMA on the proposed new Bank scheme, the transfer application and the changes proposed for the BNZOPA itself (which, as noted above, will also require the FMA s consent); and the FMA has indicated that subject to certain important (but clearly identified) pre-conditions being met, the changes we are looking at can in principle be approved. Importantly, the FMA can only give the required consents if satisfied that the new scheme is no less favourable to transferring members than the BNZOPA and the transfer proposal is otherwise reasonable in all the circumstances for members and pensioners. What will be the benefits of the new scheme for members? The Bank intends that, like the BNZOPA scheme, the new scheme will operate only for current and former Bank staff. It will also leverage the success of BNZ KiwiSaver by using that scheme s much more modern administrative, technological and member services model. For members, we anticipate a range of benefits such as: access to a wider range of investment options (including being able to have multiple options) and more flexibility in switching; total fees and charges that are the same as or less than what members would be charged under the BNZOPA cost structure; improved services including on-line facilities, more regular reports and communications; and the use of daily unit pricing for valuing members balances, in place of the current monthly and interim earnings rates system (with its risk of imprecision). It is intended that the new scheme will also have a more market standard governance structure under which: BNZ Investment Services Limited (BNZ Investments), which is duly licensed and manages BNZ KiwiSaver, acts as the manager; there is a licensed supervisor, independent of both the Bank and BNZ Investments, which oversees the scheme and holds all assets in trust for members (this is likely to be The New Zealand Guardian Trust Company Limited); and independent professional third parties (likely to be Trustees Executors Limited and MMC Limited) perform all member registry and investment administration functions.

3 Page 3 Will transferred members have the same early withdrawal entitlements in the new scheme as currently? Yes but BNZOPA-equivalent early withdrawal entitlements will be available only to members who have been transferred to the new scheme from the BNZOPA. The current early withdrawal facilities are described in the most recent Product Disclosure Statement for the BNZOPA (available under How to Join at Pre-transfer BNZOPA withdrawals (and membership periods) will count for withdrawal restriction purposes. A retention member who is transferred to the new scheme will be permitted to make withdrawals from the new scheme on a no less restrictive basis than currently. For completeness, any employee who as at the transfer date: has made a full in-service exit from the BNZOPA; but has yet to re-join, as the one year stand-down period has not yet passed; will be permitted to join the new scheme when that one-year elapses, but may only make one more such withdrawal (and will then never be permitted to re-join). What happens if an employee member of the BNZOPA leaves the Bank between now and the transfer date? If the member takes a lump sum benefit on leaving service then he or she will exit the BNZOPA and therefore will not be transferred to the new scheme. If the member: meets the criteria set by the Board of Management for leaving his or her entitlement balance in the BNZOPA; and chooses to become a retention member of the BNZOPA by leaving that balance in the scheme; then he or she will be transferred to the new scheme as a retention member unless the balance is fully withdrawn in the meantime. PENSIONERS What are the changes for pensioners? Assuming the FMA approves the transfer, the BNZOPA will then continue exclusively for pensioners. The main change in that event will be that the management of the BNZOPA is then outsourced to a specialist professional administrator. Additionally: the surplus assets will remain in the BNZOPA to be held exclusively as an actuarially recommended buffer to cover pension liabilities; and the BNZOPA rules will be amended (subject to FMA consent) to provide stronger pension funding protections; thereby giving pensioners the comfort that they will not be disadvantaged by any of the proposed changes.

4 Page 4 What will happen with any BNZOPA surplus? The amount transferred to the new scheme will comprise only the members full entitlement balances and will not include any surplus component. In this way, the existing surplus as at the transfer date will remain in the BNZOPA as a buffer for pension liabilities. The BNZOPA s surplus is currently held as an actuarially recommended buffer to cover pension liabilities. It is proposed that if there is any surplus remaining in the BNZOPA after all pensions have been paid in full and there are no longer any pensioners, the Board of Management will seek to amend the BNZOPA rules to enable the transfer of that residual surplus amount to the new scheme for the benefit of members. The Bank has confirmed that if such an amendment is not possible and the residual surplus is paid to it with FMA consent, as the rules already allow, then it will transfer to the new scheme for the members benefit the full amount received (less contribution tax). What other steps will be taken to ensure all pensioners are fully protected? The Bank and the Board of Management intend amending the BNZOPA rules to prescribe enhancements (including stronger year-to-year Bank funding obligations than the current rules impose) that will take effect following the FMA-approved transfer of all members to the new scheme. The detail of these amendments is being finalised. How do I know that the Board of Management is looking after members and pensioners best interests? The Board takes very seriously its role of safeguarding the rights and protecting the interests of all BNZOPA members and pensioners. The Board is obtaining its own legal and actuarial advice regarding the proposed new scheme and transfer proposals and the changes proposed for the BNZOPA, and will continue closely monitoring the project. In due course the Board will be required to certify to the FMA that: the terms and conditions of the new scheme are no less favourable to transferred members than the terms and conditions of the BNZOPA; and the transfer is otherwise reasonable in all the circumstances. What happens next? For now, the Bank is preparing detailed plans to implement these proposed changes in a way that is in the best interests of members and pensioners. Before any changes happen, members will be given full information on what is proposed, including sufficient details and time to compare the new scheme with the BNZOPA (and to seek independent advice if they consider it necessary). Members and pensioners will also have the right to make a submission to the FMA at that time. In the meantime, it is business as usual for the BNZOPA.

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