questions for written response

2007/08 financial review of Retirement Commissioner questions for written response Why did the Commission have a $463k surplus in the 2007/08 financial year when it budgeted on a $1.049 million deficit? There are two main reasons for this variance. First, production of a new television advertisement which encourages New Zealanders to visit the Sorted website, or obtain a Sorted brochure, was delayed for three months owing to licensing difficulties the production house encountered. This meant that production costs and media costs were incurred later than expected. Second, the Commission is now required by the auditors to 'capitalise' the development and maintenance costs of the interactive components of our Sorted website. In previous years we were required to treat these costs as operating expenses. As a result the expense is now amortised over 48 months rather than expensed in the month the costs were incurred. How does the Commission intend to finance its forecast deficits in the 2009/10 and 2010/11 financial years? The Commission will fund any deficit from retained earnings. However, we are reviewing these forecasts as we complete our planning for 2009/10 and develop the next Statement of Intent (currently underway). We expect that our forecasts will not result in deficits. The reason for this is that we are using most of our retained earnings this year. In relation to the recommendations of the National Strategy for Financial Literacy, what progress has been made towards: improving the transparency of language about financial products; and building standards for assessing and improving the competency of financial advisers? Improving the transparency of language about financial products is challenging but achievable. Often the complexity of language is a reflection of the complexity of the products themselves. However, some progress has been made. The Retirement Commission has 'put the issue on the table' when speaking with the financial services industry. The response has been positive, with peak bodies taking some initiatives to improve transparency of language. For example, ASFONZ (Association of Superannuation Funds of NZ) has been running Communication Awards for its members. At a recent awards event (at which one of our staff was a judge) we presented a 'plain English' review of three entries and showed the entrants sections of their own documentation

which were difficult to understand. To help the entrants we employed communications specialists to re write some paragraphs in plain English to prove it was possible. The ISI (Investment Savings and Insurance Association) is also looking at how to make communications clearer. To lead by example, the Retirement Commission has reviewed its own material to ensure our documents and website content will be easily understood by our target audiences. Regarding standards for assessing and improving the competency of financial advisers, the new Financial Adviser Act 2008, when fully implemented, will make considerable progress in this area. We are working with the Ministry of Economic Development's Financial Adviser Disclosure Working Group on the regulations supporting the Act. We expect financial education will form an integral part of achieving effective disclosure. What effect, if any, is the current economic downturn having on the activities needed to bring about the aim of the National Strategy for Financial Literacy? The current economic downturn, as well as highlighting the importance of financial literacy, has caused a significant increase in demand for financial education from all known sources. Usage of the Sorted website and brochures has increased considerably in recent months. In January, website traffic was up by 30 percent compared with the same month last year. 1 Does the Commission have data on who is using the Sorted website? If so, does it know: what proportion of users are professional financial advisers; what proportion of users are private individuals; and how well the current user mix aligns with the Commission's goals for the Sorted website? We collect a lot of data on usage of the Sorted website a summary of this is included as Appendix 1. At the moment we don't know what proportion of users are professional financial advisers compared with the proportion of private individuals. However, we will be receiving estimates of this through user survey findings later this year. Anecdotal feedback from advisers suggests many do encourage their clients to go to Sorted. We intend seeking information from the Institute of Financial

Advisers to verify this. Most financial institutions promote sorted.org.nz via their own websites. Our goals for Sorted usage are based on the number of New Zealanders accessing Sorted. We do monitor the mix of users as much as we can (age, income, sex, employment status, etc) through sample surveys and web monitoring. Research among sorted.org.nz users (due for completion in late May 2009) will provide more information regarding the make up of our current user base and what actions people are taking as a result of absorbing Sorted's information. The current mix of Sorted users is broadening each year. The addition of free booklets (covering nine money related topics) and the support of 15 Pak 'n Save supermarkets in distributing them, has significantly changed the mix of people using Sorted resources in the past 24 months. More than 300,000 Sorted booklets have been distributed across New Zealand since early 2007. Sorted.org.nz was used by 1.2 million people during the calendar year of 2008. See Appendix 1 for data regarding Sorted users. 6, How is the Commission evaluating the effectiveness of the Sorted website in making New Zealanders financially well educated so they make informed financial decisions? We are currently undertaking research to determine the actions taken by sorted.org.nz users having used the website. A report will be available in May 2009 we would welcome the chance to provide a summary to members of the Social Services Committee at that time. A similar research project was carried out in 2007 a section from the 2007 Sorted user survey summary follows. "Eight in ten adult users indicate some degree of likelihood that they will take action after visiting the Sorted website. While there are differences between first time users (73 percent) and repeat users (86 percent), overall intention levels indicate that the site is motivating. " (Nielsen June 2007) The KiwiSaver Communication Evaluation Report (Colmar Brunton January 2008) showed that 66% of those people aware of KiwiSaver felt they had been provided with enough information to make a decision on KiwiSaver. Twenty six percent of that same sample said Sorted helped them make a decision about KiwiSaver.

More than one million New Zealanders to date, have used Sorted's KiwiSaver resources (website, booklets and seminar modules) since early 2007. What reviews and updates of the Sorted website has the Commission undertaken, or is planning to undertake? All Sorted content (website and booklets) is reviewed regularly. Website content, for example the Mortgages or Investment sections, is reviewed for relevance and accuracy. To ensure balance, this is often done by both an independent source and an industry source. For example, the current review of the Mortgages section is being completed by an independent financial consultant as well as the marketing team of a retail bank. As a range of individuals and enterprises contribute to Sorted content, the peer review of that content is very important. Each section has a variety of peer reviewers. In addition to content reviews, we review current content when appropriate in line with calendar events or changes in the economic climate. Examples of this type of review include the 1 April 2009 changes to NZ Superannuation rates, personal tax rates, student loans and the KiwiSaver scheme. These changes have resulted in changes to eight Sorted calculators, three areas of text within sorted.org.nz and three Sorted booklets. We have also reviewed Sorted's investment content several times over the last 12 months to ensure the information provided is appropriate in the current economic climate. A further content review is planned this financial year for the 60 plus and Insurance sections of sorted.org.nz. as well as a full review of all Sorted booklets. How is the Commission balancing its strategies to ensure effective communication across society, particularly with regard to the national financial education strategy? We have understood Financial Literacy. this question to refer to the National Strategy for The Commission's planning is undertaken with the goals of the National Strategy, and the Commission's role in the Strategy, in mind. The three strategies are: i. Reaching people the Retirement Commission's Sorted marketing programme segments the population based on attitudes to money, financial literacy level and ethnicity. Product development and 4

communication are focused on increasing the number of people using Sorted resources this can only be done by creating relevant and accessible forms of information. ll. Extending delivery recognising that sorted.org.nz could only satisfy a portion of Kiwis' financial knowledge requirements, our emphasis from 2007 shifted to balancing the website with a range of free booklets and seminar modules. Engaging 15 Pak 'n Save supermarkets nationwide to distribute free Sorted booklets has extended Sorted's audience considerably in 2008. Some translation of Sorted material has occurred in recent years. For example, the booklet "KiwiSaver: Is it right for you?" was translated into six languages. A project is also underway involving members of the South Auckland Pacific Island community to assess and potentially redevelop some Sorted resources for future use among Pacific groups. 111. Sharing what works evaluating the outcome of financial education is challenging. The Retirement Commissioner is chairing the OECD committee that is working towards best practice guidelines for evaluating financial education. The Commission is planning to test these draft guidelines with some of its programmes in the coming year. We also make all of our evaluations of programmes publicly available on our website. We note that the Commission will be passing over financial education in schools to the Ministry of Education from July 2009, and has delegated retirement village education to the department of Building and Housing. What role will the Commission continue to play in these areas? What ongoing oversight or monitoring will the Commission undertake? In terms of the schools programme, the Commission's role will be monitoring implementation and providing any assistance the Ministry needs. We wilt continue to champion the project. The monitoring arm of our Centre for Financial Literacy will take a close interest in how financial education in schools is developing. The Ministry has been very supportive and positive about taking responsibility for this important project. We have a memorandum of understanding with the Department of Building and Housing on the delegation of functions. This requires quarterly updates on progress. We are in regular contact and monitor progress on retirement village education. We retain some information on our website for operators and residents.

10. What evaluation will be undertaken of the financial education in schools programme? Evaluation of the framework has been undertaken through a trial involving ten primary and secondary schools in late 2008. Recommendations from the trial are being implemented and witl be available through the Ministry of Education, for all schools to incorporate in the new New Zealand Curriculum effective from 2010. From that point the evaluation will be undertaken by the Education Review Office (ERO). If personal financial education is seen as a Government priority ERO can evaluate each school's programme through the tri ennial school review. Also, a school may ask ERO to provide comment on its personal financial education programme as part of the school's identification of curricula to be reviewed. 11. What other financial education programmes is the Commission developing? We have five key financial education programmes targeted at the following groups. 1 Schools the goal is to provide schools with a framework for teaching personal financial education (PFE) through the essential learning areas of the New Zealand Curriculum. From 2010, PFE will be integrated into school programmes in language, social studies, mathematics and technology for years 1 10. The Retirement Commission's programme is being transferred to the Ministry of Education in June 2009, as noted above. The Ministry will have ongoing responsibility for its promotion and development. 11. Tertiary our goal is to have elements of personal financial education (PFE) included in entry level qualifications approved by the New Zealand Qualifications Authority (NZQA). We have worked with NZQA to develop unit standards in PFE which are in the National Qualification Framework. Discussions have been held with the Industry Training Federation, the Council of Trade Unions, Business NZ, the Association of Institutes of Technology and Polytechnics, the NZ Association of Private Education Providers, the Tertiary Education Commission and NZQA. Unanimous agreement has been reached to promote seven of the unit standards to qualification developers and providers for inclusion in qualifications. Funding provided by the Tertiary Education Commission, Industry Training Federation and the Retirement Commission has enabled work to start on developing teaching resources and evaluation

techniques for these seven basic unit standards. When completed this material will be available free to all qualification providers it will also be available to schools to use as part of the NCEA programme for senior students. Once the unit standards material has been developed funding is available for promotion and developing it into a web format. 111. Adults in the workplace the Sorted programme targets working New Zealanders. Employers have become more and more supportive of their staff using Sorted resources following the launch of KiwiSaver and asa result of the current economic downturn. This includes providing employees with access to the Sorted website, making booklets available and running workplace seminars using Sorted seminar modules. We regularly remind employers of the benefits of having a financially sorted workforce, for example reduced absenteeism, and they are responding more now to these messages than ever before. iv. Adults in the community the Sorted programme also targets non working New Zealanders or people outside the workplace. This is achieved, for example, through community trusts (e.g. the Waipareira Trust) and through adult and community education networks. V. Older New Zealanders the 60 plus section of sorted.org.nz provides older New Zealanders with information on living in their semi retired / retired years and calculators to help them work out how best to manage a nest egg. We have also published a guide, "Your money in retirement", which Work and Income offices distribute to every Kiwi turning 65 (as they get NZ Super for the first time). We draw attention to relevant Sorted resources through community groups such as Grey Power and Age Concern. 12. What does the Commission mean by the statement in its Statement of Intent 2008/11 that 'institutional knowledge is readily available'? This means that although we are a small agency and contract out certain specialist functions we have a stable staff and thereby retain core institutional knowledge within the Commission. 13. How does the Commission ensure that it has access to sufficient knowledge to undertake its functions? The Commission maintains contact with experts in financial education and retirement income policy both within New Zealand and around the world. We seek advice from these people as required. They include academics, service 7

providers and policy specialists. We are often asked to share our knowledge with other countries as well, particularly on financial education. For a number of projects we set up steering groups or advisory panels to help bring a mix of views and expertise to bear. We also send draft material to peer reviewers before publication. We also work with the OECD on financial education best practice issues. Members of our Advisory Group for the National Strategy for Financial Literacy are: Alan Bollard, Governor of the Reserve Bank Jane Diplock, Chair of the Securities Commission, Sean Carroll, Chair of the Investment Savings and Insurance Association Mānuka Henare, Associate Dean Māori and Pacific Development, Auckland University Business School Karen Sewell, Secretary for Education 14. What steps has the Commission taken to implement the recommendations of the 2007 review of retirement policies? The Commission made 27 recommendations in its 2007 Review of Retirement Income Policies. The Government has responded to the review and is now developing a work programme. Most of the recommendations require other agencies to implement them. Recommendations for the Retirement Commission are as follows. Rec 4. That the Retirement Commission works with Treasury and the Ministries of Social Development and Health to ensure that there is an appropriate research programme in place to assess how the costs of health, residential and in home care for older people will impact on their personal finances This is underway with a work programme. Rec 9. That the Retirement Commission, in 2008, develops financial education initiatives targeted for those on low incomes, including Māori and Pacific groups. Low income New Zealanders are one of the Commission's target groups and we produce educational material for them. We have worked with Ngāi Tahu and Te Puni Kōkiri to deliver financial education to Māori students and their whānau in seven South Island schools. We have given the teaching resources from this programme to the Ministry 8

of Education so it can make them available to other schools wanting to extend financial education to the Māori community. The Commission is also working with Te Puni Kōkiri and the Ministry of Pacific Island Affairs and other supporting organisations to develop educational material for Māori and Pacific communities. Rec 16. That the Retirement Commission, working with the savings industry, keeps its comparison information on the cost of KiwiSaver products up to date and accessible to the general public. The KiwiSaver fees calculator on the Sorted website is regularly updated. Rec 19. That the Retirement Commission maintains and enhances its workplace based information and education programme. The workplace is a key channel for the dissemination of our financial education and information. (See Adults in the Workplace, Q.uestion 11.) Rec 20. That the Retirement Commission reports annually on progress on the National Strategy for Financial Literacy The first report will be provided at the Financial Literacy 09 Summit to be held in Wellington on 26 June 2009. Rec 23. That the Retirement Commission, by end 2008, updates and extends its information about options for managing assets throughout retirement, and provides that information to older people in ways other than the internet, including liaising with other providers of information to older people The Commission has produced the booklet "Your Money in Retirement". The "Investing" booklet is also relevant to many older New Zealanders. We have regular contact with the peak bodies for older New Zealanders. As mentioned above, the material for older New Zealanders is being reviewed and enhanced in 2009/10. 15. How is the Commission monitoring implementation of the recommendations of the 2007 review of retirement policies? We are in contact with officials from the Ministry of Social Development and the Treasury who are responsible for implementing the recommendations. 9

16. When will the Commission be reporting to the Minister for Social Development and the Minister of Finance on progress against the recommendations of the 2007 review of retirement policies? Recommendation 2 of the review is That the Retirement Commissioner, by mid 2009, reports on progress made on the recommendations set out in this Review to the Minister of Social Development and the Minister of Finance. This report will be made in June 2009. Please let me know if you have further questions or would like clarification of any response. Yours sincerely Diana Crossan Retirement Commissioner 10

Appendix 1: Who uses Sorted resources? (i.e. accesses www.sorted.org.nz or orders free Sorted booklets) In 2006 the Retirement Commission set the goal of raising the number of New Zealanders who use Sorted resources from 19% (2006) to 30% (September 2010). As at November 2008 24% of New Zealanders indicate they have used Sorted resources. Retaining current users is key to maintaining the trend of increasing Sorted resource use. New users will most likely come from the 'Potential Sorted users' group defined below. Current Sorted users (24% of the population) This group has increased from 19% (2006) to 24% (Nov. 2008). Sorted resources continue to be attractive to 25 64 year old New Zealanders, able to access the internet (especially at work). They tend to be from households with average to high household incomes with a higher net worth (than Potential or Non Potential users). Potential Sorted users (40% of the population) In April 2008, Potentials were more likely to be younger (aged under 25), but also tended to have children at home, have higher than average access to the Internet, and incomes between $50K and $100K. Now Potentials have broadened demographically to the point that they reflect the general public, with the exception that they are less likely to be 65 years or older. Low potential Sorted users (32% of the population) The results show that, compared with the general public, Low Potentials are more likely to be retired, have lower access to the Internet, and have lower household incomes. However, Low Potentials are also less likely to have a negative net worth. These results are similar to the April 2008 measure. If those aged 65+ are removed, Low Potentials tend to be male, with lower income and lower access to the Internet. 11

Current Sorted Users 2008 Nov (n=118) 48% 53% 48% 52% Under 20 20 24 25 34 35 44 45 54 55 64 65+ 9% 2% 11% 14% 12% 19% 33% 9% 14% 16% 19% 21% 12% 10% 12% 8% 19% 19% 21% 19% 3% 10% 9% 15% 17% 18% 15% 16% An employee Self employed Not employed Retired Studying 35% 21% 7% 33% 8% 57% 12% 12% 13% 12% 66% 15% 10% 24% 7% 53% 15% 10% 18% 10% Yes 74% 89% 98% 87% $0 $30,000 $30,001 $70,000 $70,001+ 39% 29% 16% 36% 39% 13% 28% 47% 17% 34% 38% 15% $o $50,000 $5O,OO1 $1oo,ooo $100,001+ 43% 23% 13% 25% 33% 24% 19% 35% 32% Negative net worth Zero $1 $50K Over $50K to $250K Over $250K to $499,999 $500K+ 6% 6% 17% 11% 13% 13% 6% 1 e 8% 14% i 10% 14% 16% 11% 7% 14% 14% 15% 14% 21% 16% 20% 16% 17% 18% 12