KiwiSaver and the c-word

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In the wake of signals from Labour leader Phil Goff that the opposition may campaign for KiwiSaver compulsion, Institute of Financial Advisers (IFA) chief executive Peter Lee said forcing savers into the scheme wouldn’t benefit advisers – at least in the short term.

Wednesday, September 28th 2011, 6:58AM 5 Comments

by Benn Bathgate

KiwiSaver compulsion won’t necessarily benefit advisers and even fund managers are divided as to its benefits.

“I don’t necessarily think it’s going to make any difference, certainly not in terms of the average adviser, because given there’s 1.8 million people already in there, the people who aren’t already in probably aren’t either earning a lot, aren’t interested, have opted out, chosen not to be part of it or don’t understand the message,” he said.

Lee said an increased savings pool – and a wider range of fund options and specialisations – could in the long term benefit advisers, but he saw no adviser advantage to compulsion in the short to medium term.
“Because the nature of the people who aren’t already in there are not exactly the target market of your typical adviser.”
Professional Advisers Association (PAA) chief executive Edward Richards agreed that measures to encourage KiwiSaver take-up were commendable, but that other options existed.

While both Lee and Edwards were unified in their view compulsion wouldn’t necessarily benefit advisers, two KiwiSaver fund managers KiwiSaver Good Returns spoke to had differing views on the issue.

Gareth Morgan Investments chief executive Cathy Magiannis said, “I not sure that we’ve actually gone through the pros and cons, I don’t think we’ve yet debated that process and come up with an overall view.”

She admitted that from a providers point of view, compulsion could result in more business, though from a customer point of view it may not be the best option.

“Savings is very personal, and it’s about the individual wanting to do it, enforcing a way of thinking doesn’t necessarily get the correct end result,” she said.

“Thinking about it from a customer perspective, even as a provider, we’re here to service customers, we don’t want them to be in a scheme they don’t want to be in.”

Tower Investments chief executive Sam Stubbs, however, is an enthusiastic supporter of compulsion, saying Tower had been calling for such a change for a long time.

“It ultimately reflects the economic reality, we’ve got to become a savings culture, KiwiSaver seems to have been a very successful way of achieving that.”

Stubbs also dismissed criticism that KiwiSaver compulsion could divert money from other savings or investment schemes.

“It’s not as if diverting savings means you’re diverting it from something better to something worse, in fact the performance of KiwiSaver funds indicates you’re probably diverting it to something better.”

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

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