But what is interesting about the Eosaver closure is its decision to throw its 3,000 or so members, and the $5.5 million it had accumulated, into a KiwiSaver limbo. Unlike the slightly earlier deal where the union-based IRIS KiwiSaver provider selected the Gareth Morgan KiwiSaver as its preferred transition partner for its 1,000 or so members, Eosaver hasn't bothered trying to issue any guidance to its members looking for a new home.
Instead, Eosaver members will be told over the coming weeks to select from any of the 30-plus KiwiSaver schemes on the market to transfer to or the IRD will, eventually, randomly shunt them off to one of the six default providers. In the interim all Eosaver investments will be shifted into cash.
I think Eosaver has a duty of care to its members to at least offer them access to some financial advice about how to choose a successor scheme but I guess it didn't want to blow any more Australian money. From what I understand Eosaver was not able to extract a decent offer for its scheme from other providers after months of trying.
By my calculations Gareth Morgan will pay a maximum of $90,000 if he successfully convinces the 1,000 IRIS KiwiSaver members to transfer their estimated collective $2 million across to his rather different scheme - which equates to an industry-standard price of about 3 per cent of funds under management. Under the arrangement, Morgan will pay $70 per transfer and throw in a $20 one-year fee rebate to IRIS refugees. Morgan has also gained marketing access to the many thousands of other IRIS members who didn't sign up to the union KiwiSaver scheme.
In the press release announcing the agreement, Engineering, Printing and Manufacturing Union national secretary, Andrew Little, said: "GMK [Gareth Morgan KiwiSaver] was chosen by IRIS for this consolidation because it was consistent with the objectives of the original IRIS product which were personal service for members, a simple fee structure and no commissioned sales."
In an investment sense, however, GMK is a totally different animal to the IRIS scheme, which split its funds between AMP and Tower. IRIS members should acquaint themselves with those differences before shifting - they are not obliged to join GMK, which is also likely to charge a higher fee than the low-cost IRIS model. Will IRIS be explaining these subtleties to its members? I hope so
Pictured: Gareth Morgan. Photo: Glenn Jeffrey