KiwiSaver’s snail fail
When KiwiSavers want to switch scheme, things can move at a snail’s pace, writes Rob Stock.
It’s time to crack down on super-slow KiwiSaver scheme transfers, says Sam Stubbs, founder of the Simplicity KiwiSaver scheme.
Stubbs says 16 in every 100 people who have switched to its scheme from a rival KiwiSaver scheme, have had to wait 20 or more days for their money to be transferred over, with their old KiwiSaver provider earning fees until the day the money is transferred across.
Six in every hundred have had to wait for more than 35 days, which is longer than the legal time-limit on transfers, Stubbs says.
The slowest transfer took 75 days, he says.
Stubbs believes it is now time for MPs to amend the KiwiSaver Act to introduce a strict liability penalty for breaching the time limit as currently, there is no fine for foot-dragging.
He believes the law should also be changed to require transfers be made within ten days, and that KiwiSavers be able to see exactly where their money is at all times, because currently, savers can lose sight of their savings in the days before a scheme sends the money to their new scheme provider.
Being out of the market for lengthy periods risks KiwiSavers missing big movements in share prices Stubbs says, which could cost savers dearly.
With around 175,000 transfers a year, snail-paced transfer times are affecting a lot of people.
There’s an example from history which shows transfer times can be slashed, when there’s a will.
In the early 2000s, rapidlygrowing Kiwibank lobbied hard for industry standards to force all banks to make switching bank easier, and less time-consuming, and an agreement was reached for banks to switch information on departing customers to their new
"There should be a 10-day limit to transfer, with an instant fine if that is breached, no exceptions." San Stubbs, Simplicity
bank within five business days.
Stubbs says: ‘‘10 days is plenty of time if you’re serious about customer service. Even that gives two to three days ‘wiggle room’ if there are any errors. There should be a 10-day limit to transfer, with an instant fine if that is breached, no exceptions,’’ he says.
‘‘If a start up like us can meet those deadlines, banks can dip into their billions of profit to make it happen.’’ ‘‘We’ve noticed a recurring theme with the big banks. When it suits them it’s ‘too hard’ or they ‘are busy’. That may be okay when dealing with competitors, but when it’s KiwiSavers who suffer, that’s just plain wrong.’’
He’s made his feelings clear to the Financial Markets Authority, and it’s been taking a close look at the powers it has to improve KiwiSaver providers’ switching conduct.
It’s the licensing authority for scheme providers, that is obligated to comply with the law by their trust deeds, and act in the best interests of their members.
Liam Mason, the FMA’s director of regulation, says: ‘‘We have got a statutory maximum transfer time, but fund managers are obligated to act in the best interests of scheme members.’’
He said fast action on behalf of customers was a sign of efficiency.
Mason said the FMA could take enforcement action if scheme providers did not comply with their trust deeds.
He said civil penalties of up to $600,000 for breaching trust deeds could be imposed.
He said the FMA had begun to gather information on how long transfers were taking.
Stubbs feels the delays show nothing more than a lack of willing, and investment from the likes of the banks.
‘‘The only thing faster than the speed of light is a bank wanting to lend you money.
‘‘So why is giving it back so slow?’’