FMA warns KiwiSaver providers to put customers first

More than twice as many KiwiSaver customers switched provider in the past year than in the same period the year before - prompting the FMA to warn that transfers must be done in the best interest of the customer.

Wednesday, October 1st 2014, 1:16PM

by Susan Edmunds

The FMA has released is KiwiSaver report for the year to June 30. It shows the number of customers changing scheme in the year has almost doubled.

Total KiwiSaver FUM has increased 29% to $21.4 billion, of which 47% is in low-risk, conservative or cash funds, down from 50% in 2013.

Growth in member numbers slowed from 14% year-on-year growth in 2013 to 10% this year.

That has meant that providers looking to grow their portion of the KiwiSaver market have increasingly looked to entice members from other firms.

During the year, $3.57 billion was transferred into schemes from other schemes, up 333% from the 2013. FMA director of compliance Elaine Campbell said the AXA to AMP and ANZ to National Bank mergers represented $2.2 billion of those funds transferred. “But there is still a large percentage growth [in switches[ even when you strip out those mergers… the remaining portion is still 33% more scheme changes in this period.”

Between 2012 and 2013, the rate of transfer growth was just 11%.

Campbell said the statistics supported the messages the FMA had given the industry in its QFE report. “With these numbers of KiwiSaver members switching providers it really does emphasise the importance of ensuring that the switch experience is undertaken with customers’ interests in mind… Providers have to put the interests of the customer first when having a switching discussion.”

She said: “It is critical that members receive appropriate advice and support when they are encouraged to transfer their KiwiSaver scheme. We are concerned that some of the sales practices we have discovered through our monitoring activity do not put the customer’s interest first and this reflects poorly on some providers’ attitude towards their customers.”

The FMA was encouraging consumers to arm themselves with more information about their risk profile, the performance of funds and fees, she said. Tools such as Sorted’s KiwiSaver comparison offer would help.

There were 55,000 switches within funds during the year, which Campbell said indicated that people were looking at their options within their providers, and thinking about whether they were in an appropriate fund. Fewer were choosing to remain with the default scheme.

Standardised reporting by all providers about their KiwiSaver fees and performance was introduced during the reporting year. These Quarterly Disclosure Statements must be available online for investors to read. They make it easier for investors to compare and contrast how their fund is performing, where their money is invested and help people to make more informed decisions about their retirement savings.

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