“Global Best Practice” sought for KiwiSaver Default providers

Posted by Bruce Kerr on 25 February 2013

Workplace Savings NZ is calling on the Government to implement global best practice design as part of its review of KiwiSaver Default Provider arrangements.

The Ministry of Business, Innovation and Employment called for submissions on the review in November 2012, and 29 were received.

The existing appointment term of KiwiSaver Default Providers expires in June next year.

Bruce Kerr, Executive Director at Workplace Savings NZ says one of the most reported aspects from the submissions has been the future of the investment option for those who are ‘defaulted’ into KiwiSaver.

“Auto-enrolment means we now have a pool of members who haven’t chosen their KiwiSaver provider or investment fund, and have simply ended up with low risk, low reward.

“Nearly a quarter of KiwiSavers (or 447 thousand at 30 June last year) are ‘default’ investors and collectively they have nearly $3b invested

“Right now, with relatively low contribution rates and slowly growing balances, there just isn’t sufficient incentive for some of those people to engage,” says Mr Kerr.”

Workplace Savings NZ is calling on the government to embrace global best practice portfolio design for those in KiwiSaver but who choose to not engage with their provider or select an investment funds appropriate to their circumstances.

“This style of investment funds is usually called “life-stages. The main feature is that the level of exposure to risky assets reduces as members get closer to the NZ Super eligibility age.

“Only a few of the current default providers have indicated they support a change to the life stages investing approach. This presents a tough call for officials.

“However Workplace Savings NZ believes they should, on behalf of default investors, put global best practice portfolio design at the forefront during the review,” says Mr Kerr.

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