by Susan Edmunds
About a quarter of the two million KiwiSaver members are still in default schemes, giving little - if any - thought to their investments.
The Government has weighed in on this, this week. It has finished its review of the default provider system and decided that it will not change the requirement that default schemes be managed conservatively.
This has upset many people who thought that it would be sensible to change to a life stages approach, where people are assigned risk relevant to their age. That obviously has some drawbacks, such as for people who want to be able to withdraw some money for a first home, but people who are invested too conservatively can miss out on hundreds of thousands of dollars in returns.
One of the things that I thought most interesting about the review was the requirement that providers offer impartial advice and education to their default clients. As part of the tender process to decide the default providers for the next seven years, they'll have to show how they plan to do that.
Could it be an opportunity for independent financial advisers? Many of these schemes have so many members that it is hard to see how they could provide information and advice to them all. But I have heard from several consumers just recently, complaining about some banks' extremely agressive KiwiSaver tactics. They seem to be keeping the business as close to home as possible so we may have to wait to see how what the proposals look like when and if they are made public.
A lot of the news this week has been about retirement savings. We were at the Future of Super conference run by the Financial Services Council on Monday, where they outlined their concerns about the tax disadvantages for savers compared to leveraged property investors in particular. The conference was also told that it's currently too easy to make bad investment decisions, and too tempting to give bad advice!
I thought one of the most interesting presentations was on annuities. By the end of the year, the last provider in New Zealand will no longer be offering an annuity product. This seems a shame because annuities can be an excellent option for people who want to "set and forget" part of their retirement savings. But with interest rates as low as they are, and with tax disincentives there, too, it just isn't appealing to people at the moment.
Mortgage advisers have been dealing with the fallout of Westpac reassessing its preapprovals, following ASB's example. And in insurance, Southern Cross says people need to make sure their cover actually addresses what they might need.
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