Copied from: investmentnews new zealand

May 25, 2015

Both the Financial Markets Authority (FMA) and the Retirement Commissioner face zero-growth balance sheets for at least next year, according to Treasury budget details.

Despite taking on a greater workload due to the implementation of the Financial Markets Conduct Act (FMC), the government has funded the FMA for the 2015/16 fiscal year at the same level as the previous period: $26.184 million.

That amount is split as per the 2014/15 year with just over $12.5 million to cover “licensing and compliance monitoring”, almost $8 million allocated to corporate cop legwork, and, more than $5.6 million to pay for “market analysis and guidance, investor awareness, and regulatory engagement functions”.

The budget statement says the FMA “is rewriting their Statement of Intent and Statement of Performance Expectations to reflect increased responsibilities under the Financial Markets Conduct Act 2013”.

“Some of the performance information indicated for the appropriation may change during the year,” the budget paper says.

Similarly, the government will back the FMA’s litigation fund to last year’s tune of $2 million. The regulator’s legal fighting fund is designed to cover “costs and expenses arising from litigation between the FMA and another party involving external legal counsel and/or consultants and expert witnesses, with direct costs of at least $10,000 (GST excl), excluding FMA overheads”.

The FMA website lists 11 cases currently before the courts.

Meanwhile, the Retirement Commissioner (now housed under the Commission for Financial Capability – or CFFC – banner) has seen its 2015/16 budget trimmed back from a temporary high of just above $6 million in the previous year to $5.782 million.

“There was a one-off transfer of funding from Vote Science and Innovation to develop financial literacy pilot programmes targeted to Māori and Pacific people, which increased the appropriation only for 2014/15,” the budget paper says. “The appropriation reverts back to baselines for 2015/16 and out years [until at least 2018/19].”

According to its 2014 accounts, the CFFC spent almost $1.8 million of its budget on staff and about $1.5 million on “marketing and education”.

The budget papers also project the New Zealand Superannuation Fund (NZS) would accumulate almost $32 billion more by 2060 if government contributions recommence in the 2015/16 tax period rather than the planned 2021 period.

Under the “normal contribution logic” scenario, the government would tip in funds annually to NZS from 2015/16 until 2029 when withdrawals are scheduled to begin. Based on those contribution parameters and assuming baseline returns and tax, by 2060 the NZS would’ve accumulated about $512 billion.

However, if NZS contributions kick off again in 2021, as indicated by the government, the 2060 fund tally would equate to about $480 billion, the budget projection says.

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