Opt-in option could be popular
Schemes chosen as the new crop of KiwiSaver default funds this year may find there’s demand from investors who want to opt in, one financial services lawyer says.
Friday, March 7th 2014, 6:00AM
by Susan Edmunds
One of the conditions of being selected as a default provider for the next seven years is that the scheme must be open to people who choose to join, as well as those who are automatically enrolled.
That has not been a requirement of default schemes in the first seven years of KiwiSaver’s existence and some are only open to default subscribers.
A decision on which funds will be selected as defaults is expected soon.
The change means schemes such as ANZ’s OnePath KiwiSaver default scheme, which last year stopped anyone entering who wasn’t there by default, will have to change its approach if it is to remain a default option.
Some commentators have questioned the requirement, asking why people would actively choose a scheme that was designed to only be a “holding pen” for KiwiSavers who had not yet made a decision about the best fund for them.
But Emma Dale, of Chapman Tripp, said there could be good reasons for actively choosing a default scheme.
She said if someone wanted a conservative fund, for example a young couple wanting to withdraw money within a few years for a first home, or someone nearing the end of their working life, they might choose a scheme based on fees.
On that criteria, many of the default schemes would appeal. Default schemes have some of the lowest fees because they have prescribed fees agreed with the Government.
She said: “There are a number of factors that people consider when choosing a KiwiSaver scheme and a fund within a scheme, and fees is one factor. If people were looking to choose between conservative funds, all things being equal, they might make the choice to go into a default fund having comfort that the fees have been the subject of agreement between MBIE and the provider.”
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