by Susan Edmunds
The FMA is looking into the carrots being used to tempt new KiwiSaver members to join the retirement savings scheme.
The Government announced in this year’s Budget that it was axing the $1000 that had previously been available to all new members.
AMP offered a competition in response, which put all new sign-ups in the first two weeks of June into the draw for $1000.
Therese Singleton, AMP’s general manager of investments and insurance, said it was designed to target those who had been meaning to sign up but missed out on the $1000 from the Government.
She said the $1000 could mean about $9000 over a 40-year investment period.
But other less obvious incentives are also being looked at, such as phone calls from KiwiSaver providers encouraging those who have recently signed up to actively choose the most appropriate fund for them – sometimes the higher risk, higher fee options that better suit young investors.
The FMA told media that the offers were not necessarily bad but had to be appropriate.
Adviser Liz Koh, who deals with KiwiSaver, said incentives such as AMP’s seemed designed to help advisers sell the product as much as to encourage consumers to join.
“AMP generally sells through advisers and every now and then they do a promotion.”
She said it was a “good news story” that would help advisers start the conversation with their clients.
While they were there, they could then talk about other things such as insurance needs. “It works in terms of motivating the adviser and probably makes them more proactive about contacting people.”
She said consumers should not need incentives to see the value in KiwiSaver..”You wouldn’t want to sign up for what is essentially a lifetime commitment on the basis of an upfront handout, it is not logical.”
She called on the Government to spend the money it saved axing the $1000 kickstart on financial literacy education.
Koh said calling people to discuss KiwiSaver funds was only a problem if savers did not have access to good advice at the time. She said that was an issue that should be addressed in the FAA review.
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