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Fees only one part of default fund debate

The fees issue is just one of many around how to get the best out of KiwiSaver default funds, according to Savings Working Group member Paul Mersi.

Tuesday, November 15th 2011, 6:43PM

by Niko Kloeten

While the current default fund system isn't up for review until 2014, the Green Party's election policy of creating a "public option" default fund managed by the Guardians of the New Zealand Superannuation fund has put the issue into the spotlight.

The Savings Working Group, which was set up by the government to look at policy around savings, mooted a similar policy but didn't make a recommendation either way.

"We had a view that it was worth looking at but we didn't have the time or resources to fully investigate that," Mersi said.

"The government's got this product where there are a lot of people coming in who don't care who the provider is.  Our perspective was that one fund, five to six times bigger might be able to be of sufficient scale to paddle in bigger pools and deliver low fees.

"The level of fees is only one bit of it - the other bit is to make sure that they have an asset mix that is appropriate to their circumstances.  There needs to be a more structured approach to tailoring people's assets to people's age."

Mersi said it was proving harder than expected to shift people out of default funds and the managers of the funds weren't finding them as lucrative in that regard as they'd hoped.

He said the default fund issue would need sorting regardless of which party won the election, and it would be particularly important if KiwiSaver became compulsory as many thousands more would end up in default funds.

"If you're going to be sucking more people into the machine there's actually an increased responsibility to make sure the machine you're sucking them into is the best it can be."

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Heartland Bank - Online - - - -
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HSBC Premier LVR > 80% - - - -
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HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank 5.20 4.20 4.30 4.64
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Napier Building Society - - - -
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Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
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TSB Bank 6.09 4.19 4.35 4.69
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