by Paul McBeth
Spokesman Michael Chamberlain condemned the six default providers for not taking the opportunity to give eosaver's 3,000 stranded clients some stability, and said default system cuts competition and limits quality. He claims the current system offers few incentives for default providers to give their customers a premium service.
"This smacks of arrogance, as the default providers know that if nothing is arranged for these 3,000 members they will automatically absorb them through the default mechanism at no cost," he said in a statement. "What should have happened is that one of more providers should have had the opportunity to work alongside the trustees of eosaver to offer its members a credible alternative."
Eo Financial Services decided to leave the market last month after it lost more than $2 million in the 13 months ended June 30 2008, blaming a saturated market. The first merger for KiwiSaver took place when Gareth Morgan KiwiSaver took over the IRIS KiwiSaver run by the Engineering, Printing, and Manufacturing Union, National Distribution Union, and Service and Food Workers' Union.
Vance Arkinstall, chief executive of the Investment Savings and Insurance Association, knocked back Chamberlain's criticism, saying the default providers account for 35% to 40% of KiwiSavers who might not be financially literate and are a good stepping stone into investing with a fund manager.
"It's turning out to be a very good system," Arkinstall said. "The issue is to get New Zealanders into a savings vehicle, and as they gain experience, they can convert" to a less conservative provider, he said.
KiwiSaver hit one million investors in April, 21 months after it started, and much earlier than the projected 2015 timeframe predicted.
Paul is a staff writer for Good Returns based in Wellington.
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