KiwiSaver default funds should be balanced: ANZ
KiwiSaver default funds should be balanced, rather than conservative funds, Members of Parliament have been told.
Wednesday, September 12th 2007, 6:18PM
by Rob Hosking
"We strongly believe that's the wrong default," ANZ's general manager of people capital, Andrew McSweeney, told the finance and expenditure select committee.
"Most people will not exercise choice, and they will end up with a capital sum of anywhere of between a third to a half less than they would otherwise have if they'd gone into a balanced fund."
ANZ also suggests the government take another look at the way employer contributions are calculated.
This has been an ongoing theme from a number of submitters who have existing workplace superannuation schemes. Those who already make an employer contribution to an employee will have to make the mandatory KiwiSaver contribution on top of the existing amount.
That is probably being changed, but there is also a difficulty because most existing schemes use a different calculation method: the contrition is based on gross salary or wages, and not gross base salary.
This use of two multipliers hugely increases the complexity for employers, ANZ Bank told MPs.
The different methods also mean it makes it very difficult for employees to understand.
"It is important the Bank's people – and all New Zealanders – have the ability to make informed judgements and effective decisions about their savings. Adding more complexity, in our view, is likely to frustrate efforts to lift people's financial literacy in New Zealand, and, moreover, discourage people from locking in funds until age 65."
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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