by Rob Hosking
And there is also doubt as to whether existing superannuation schemes will convert to KiwiSaver.
“Default KiwiSaver providers may benefit more from any growth given they are likely to obtain proportionately more members, given [that] members who make no choice are allocated to these providers,” officials warned in a regulatory impact statement accompanying the KiwiSaver Bill.
“These [default] providers may be more likely to obtain an efficient scale for their operation. Other providers may find it harder to compete and attract business.”
And smaller providers may be squeezed out altogether.
“Non-KiwiSaver providers, particularly small and niche providers may withdraw from the retirement or long-term saving market, given difficulty achieving economies of scale.
“A result is that the long-term savings market may become more consolidated and less competitive.”
Overall, the financial sector will benefit from KiwiSaver, the statement says, although, as well as the issue of non-default providers gaining enough members to be efficient, there is also the issue of what will happen to existing schemes.
This issue has been subject to a great deal of work with the Association of Superannuation Funds (ASFONZ).
Officials say that if existing registered superannuation schemes wind up, “funds may flow out of the financial sector.
”It is uncertain how registered superannuation schemes will respond, particularly as there is a lack of quality data in this area and the scheme designs are significantly different to KiwiSaver.
“However, it is unlikely that schemes will fully convert to a KiwiSaver scheme as this would require the agreement of all members which is unlikely and obtaining agreement would be costly,” the bill’s notes say.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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