by Daniel Smith
Responding to the claims, MBIE manager financial markets, Sharon Corbett said that the previous iterations of the default scheme have outgrown its original purpose.
“When the KiwiSaver default scheme began in 2007, it was intended as a transitional parking space for members.
“However, there are currently 381,000 people who remain in a default fund and who haven’t made an active decision to do so.
“We’ve therefore made improvements to the scheme to ensure those people aren’t missing out on potentially higher returns and low fees.”
One of the key concerns raised by Joe Taylor, CEO, and founder of BetterSaver, was that the Government has gone for a one size fits all approach for its 381,000 default scheme members.
But Corbett says that this approach will provide the best outcomes for those who have a low engagement with their KiwiSaver.
“By moving these people to a balanced fund and lowering fees we are looking to support people who don’t make decisions about their KiwiSaver so that they could have much more money by the time they retire.”
Corbett says an important feature of the new regime is that default providers will have to engage with their members at key points in their retirement journey.
“These new default member engagement requirements will help members make more informed decisions about their fund based on their individual circumstances.
“For example, the requirements mean KiwiSaver managers will have to talk with their members at key life moments, such as when they first join the scheme, when they withdraw their fund for a first home deposit, when they’re 10 years from reaching 65, and once they’ve turned 65.”
Although fees had a 60% weighting in the KiwiSaver RFP, Corbett says that the consultation covered a wide array of changes to the policy settings that would enable benefits for default members.
The final decision was reached after 280 submissions, including from a number of financial industry representatives.
| « KiwiSaver: Concern over fee-focused default funds | Mann on a mission to diversify financial advice » |
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