COME ON PROVIDERS!

Many KiwiSaver providers are still not doing what I think they should — given that the scheme gives them a whole lot of business. According to the newly-released

2018 KiwiSaver Report from the Financial Markets Authority:

● The average fee is $117 a year per member — a huge 19 per cent higher than last year. A major reason is that the average KiwiSaver balance, at just over $17,000, is 14 per cent higher than last year, largely because returns have been so good. And almost all providers charge fees that are a percentage of the member’s balance. Still, there’s a considerable difference between 14 and 19 per cent. I had hoped the entry to the market of low-fee providers Simplicity and Juno would have pushed fees down.

● The number of people in default funds — they’ve stayed where they were plonked after being auto-enrolled — is the lowest since 2011. That’s great. But still they number more than 400,000, or 15 per cent of all KiwiSavers. And most default providers are still doing too little to help these people move to the most suitable fund for them. Once again, Booster has done by far the best, with 15 per cent of its default members moving to a different Booster fund. Second best is ANZ at 10 per cent, then Mercer at 8 per cent. The others — ASB, BNZ, Fisher Two, KiwiWealth and Westpac — all moved only 3 to 5 per cent, and AMP gets the booby prize, at 2 per cent. Those bottom performances are pathetic, given that the FMA has been working to get more action here.

● A huge number of members, more than 1.1 million out of the total 2.8 million, didn’t contribute to KiwiSaver in the two months ending March 31. Some would be non-employees who make a lump sum contribution in May or June, but many are on contributions holidays or otherwise not contributing. While the non-contributors should take the main responsibility for missing out on KiwiSaver incentives, providers could do more to encourage their participation. Similarly, it’s ultimately up to KiwiSaver members to move to low-fee providers and to get themselves out of default funds — as I repeatedly urge. But many providers must be profiting nicely from KiwiSaver. It’s well past time they used more of that money to help members also profit.

Footnote: Although I’m a director of the FMA, the views expressed here are mine, not the FMA’s.