New Zealand Herald, 6 October 2010Mary Holm answers a question about KiwiSaver provider transfers in her column in the New Zealand Herald
I'm a KiwiSaver provider. I've noticed an increasing number of our KiwiSaver members are being "stolen" by the banks - leaving the clients significantly worse off.
People go into a bank to open an account, take out a mortgage, etc, and end up transferring their KiwiSaver scheme. When we write to them to arrange the transfer out from our scheme, they are surprised and claim that they never joined the ABC Bank scheme. However, the paperwork says otherwise. Clearly it wasn't explained.
I think that all providers should be required to set out a comparison of the schemes - theirs and the one the person is currently in - before being allowed to transfer a person. I suspect that the number of transfers would go down and that this would benefit the members.
A cynic would say that of course you would think people are worse off if they leave you - but that might not be the way the clients see it. However, something is clearly wrong if someone doesn't even know they've made the move. And while I could say that people who sign forms they don't understand deserve whatever comes to them, taking on a mortgage can involve vast amounts of paper.
Nonetheless, that's not a good excuse. The first message here has got to be: know what you are signing. If you're overwhelmed by all the forms, ask if you can take the papers away to review them. If the bank is reluctant, something's fishy.
I must say, too, that I don't like the idea of bank employees receiving extra pay for signing people up to KiwiSaver - and other products. I suspect many people think their banks work in the best interests of their customers, but that might not always be so. While almost everyone will benefit from being in KiwiSaver, they may not benefit from transferring schemes, as you say. And beyond KiwiSaver, I've heard too many stories of banks signing up customers to unsuitable investment products. It would be great if banks abandoned these employee incentives. How about it, bankers? Then you could advertise that: "We are the bank that looks after our customers first - before our bottom line." We live in hope.
Your suggestion about providers having to give would-be transferors a comparison of KiwiSaver schemes is interesting, but would it work? How would a provider gather information about the other provider? And wouldn't they simply present the information so it puts them in a better light?
There's a crying need for independent comparisons of KiwiSaver schemes. The KiwiSaver fee calculator on www.sorted.org.nz is a good start, and I suggest everyone uses it - whether joining KiwiSaver, considering a transfer or just wondering if you're getting a good deal. While fees are not the only consideration, lower fees can make a big difference to KiwiSaver growth. Take, for example, a non-employee who invests $20 a week - $1043 a year - in a fund that returns 6 per cent a year after tax. If fees are 0.5 per cent, after 30 years the savings will total about $162,000. But if the fees are 2 per cent, the savings will total just $124,000.
What about other factors, such as: quality of provider communications; flexibility of contributions; local or overseas management; availability of ethical funds or funds that adjust risk according to your age; and whether the top boss is in his or her own scheme? The only independent source I know of on such topics is my book The Complete KiwiSaver.
However, the Government and the Retirement Commission are looking into providing more comparative information. The sooner, the better.