KiwiSaver is changing… and we think it is for the better. After several months of consultation and research an independent panel has led to a reduction in the number of default KiwiSaver providers from nine to six. The newly appointed KiwiSaver default fund providers are Bank of New Zealand, Booster, BT Funds Management (Westpac), Kiwi Wealth, Simplicity and Smartshares (NZX).
The companies that were axed by the government were AMP, ANZ, ASB, Fisher Funds, and Mercer.
Nothing changes immediately as these changes will only come into place once the current contract terms expire with the incumbents on 30 November 2021.
The biggest reason for the changes? KiwiSaver fees. The Minister of Commerce and Consumer Affairs, David Clark, said that the actions they have taken are because “Kiwis deserve better bang for their buck”. Default KiwiSaver funds are the area that the governemt has the most ability to regulate and as such it is here that they have swung the axe and shaken things up. The new default KiwiSaver fund providers have been granted their spots because they have better services and lower fees.
Clark went on to say; "The six default providers were selected because they offer the best value for money for their members in terms of lower fees and higher levels of service."
"We've also changed the default provider settings to enhance Kiwis' financial wellbeing in retirement. This includes moving the default investment fund type from a conservative to a balanced setting to increase the likelihood of higher returns over the long-term."
The use of a conservative KiwiSaver fund as the default scheme has long been criticised in financial circles as it has been seen as limiting the returns investors would receive over the long term.
"To illustrate just how much default members stand to gain, an 18-year-old earning $50,000 a year and contributing three percent of their income to KiwiSaver is estimated to have an extra $143,000 when they reach 65. They will also pay around $3900 less in fees.
"Another enhancement is ensuring default members receive higher service levels from their provider, including guidance at key points on their retirement journey to help them with things like selecting the right fund and contribution rate. "However, if a member wishes to remain with their current provider or in their current fund, they can choose to do so by contacting their KiwiSaver provider."
Minister of Finance Grant Robertson said the changes will apply some competitive pressure and greater competition, something us here at NZ Compare love to hear! "I imagine you will see responses and reactions in the market."
Clark hoped the news about KiwiSaver providers would encourage Kiwis to look at their KiwiSaver and think about comparing which KiwiSaver fund was best and where to invest their money. This is something we strongly recommend here at NZ Compare as while many people actively manage their KiwiSaver fund, about 11-12 percent of people did not, and it is those people who would benefit the most.
Clark continued; "We do want people to be actively engaged with their funds so this is an opportunity for everybody to step back and say 'am I getting value for my money?'."
Here at NZ Compare we have partnered with National Capital to help Kiwis answer the question of if you are in the right KiwiSaver fund. National Capital offer FREE, professional financial advice to help you figure that out. You can request a free KiwiSaver health check or simply compare your KiwiSaver with the best performing KiwiSaver funds.
If you aren’t sure where to start, click through below, leave your details and one of the team at National Capital will walk you through everything, no pressure, free of charge and help you make an informed choice on your KiwiSaver fund. Getting the right fund will save you thousands in fees and could make you tens of thousands richer come retirement or when you cash in for that first house deposit.