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Axed KiwiSaver funds haven't done a good job

Booster managing director Allan Yeo says retaining KiwiSaver is reward for the firm's engagement with members and low fees.

Saturday, May 15th 2021, 12:33PM

by Staff reporters

Booster's Allan Yeo.

Yeo is relieved the business retained its default provider status and says it's due to the work it has done engaging with members.

He notes the schemes to lose their default status are all ones which were originally appointed when KiwiSaver started, and it seems they have not done enough to get members out of default status.

While he doesn't go as far as saying they are being punished, he does say "others have done a better job".

He says the recent tender process for default status shows those managers have not done a good job at getting members to make active choices. He also questions how much money these default members have lost by not being in a fund which is appropriate with their risk profile.

For Yeo retaining default status "is testament to Booster’s ethos – helping Kiwis make sense of money. We offer a comprehensive range of KiwiSaver funds, including ethical investment funds, innovative digital tools and dedicated resources to help our members save for their best financial future.”

Booster is the smallest default provider but it is focussed on engaging with members and offering them financial advice.

Yeo points out Booster has the highest engagement rate of any of the current default providers, according to FMA data, and it also has the lowest fees of any of the current default providers.

When the new defaults take over on December 1, Booster will have the third lowest fees behind passive offerings NZX/Smartshares and Simplicty.

Retaining default status is not a huge financial benefit to Booster, but its advisers could do well.

Yeo estimates around two thirds of the 381,000 members still in default funds are sitting in the schemes which have lost default status.

They will be transferred to the new providers and Booster encourages new members to use a financial adviser.

Yeo says having default status is extremely important for Booster's reputation and is an "important validation of what we are trying to do. Financially it has probably cost us money," Yeo says.

Changing default settings and putting new members into balanced funds rather than conservative funds makes sense, he says.

Most of the members who are allocated to providers in the default process are relatively young and they should be able to tolerate higher risk. 

Indeed, Yeo says these people should probably be in higher risk profile funds.

"Even the balanced fund isn't where they should be."

RELATED STORIES

Five KiwiSaver providers lose default status; Two new ones appointed

Tags: Booster default funds KiwiSaver

« Five KiwiSaver providers lose default status; Two new ones addedFisher Funds - 'not a cut-price fund manager' »

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AIA 4.55 ▼2.19 2.59 ▲2.99
ANZ 4.44 2.79 3.19 3.59
ANZ Special - 2.19 2.59 2.99
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BNZ - Classic - ▼2.19 2.55 2.99
BNZ - Mortgage One 5.15 - - -
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BNZ - Std, FlyBuys 4.55 ▼2.79 3.15 3.59
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BNZ - TotalMoney 4.55 - - -
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First Credit Union Special 5.85 2.95 3.45 -
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HSBC Premier 4.49 2.19 2.45 2.69
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HSBC Premier LVR > 80% - - - -
HSBC Special - 2.25 - -
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.67 2.97 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.04 3.40 3.84
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.19 2.55 2.99
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
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The Co-operative Bank - First Home Special - ▼1.99 - -
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The Co-operative Bank - Standard 4.40 ▼2.69 3.09 ▲3.49
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TSB Special 4.54 2.19 2.55 ▲2.99
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Westpac 4.59 ▼2.79 3.19 3.59
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Westpac - Offset 4.59 - - -
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Median 4.55 2.68 2.99 2.99

Last updated: 18 June 2021 9:03am

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