Manager wins tick for making KiwiSavers choose best strategy

When it comes to getting people thinking about retirement, one provider is blowing the competition out of the water.

Booster KiwiSaver came out top in an investigation by the Financial Markets Authority (FMA) on the efforts that default providers are making to get members moving from low risk, low return default funds into something more appropriate for their retirement goals.

Booster, which until recently was known as Grosvenor, is shifting members out of default funds at double the rate of its nearest rival, but chief investment officer and joint chief executive officer David Beattie says its 22 per cent success level is still too low.

"We believe 50 per cent of the people in default funds really shouldn't be there for the long term."


The message delivered by the government when the current list of default providers was selected in 2014 was that default funds were a "temporary holding fund" until investors made an active fund choice.

The FMA's first survey of engagement efforts made by providers, which it said would be used as a benchmark for future reporting, showed the worst performing provider, ASB, got just 1 per cent of its default members to make a decision about their KiwiSaver fund choice.

FMA chief executive Rob Everett says providers have complained of "barriers" to encouraging default members to consider their investment options - but many of the same providers have been very successful in encouraging other providers' members to transfer to their schemes.

Beattie says for a KiwiSaver in their 20s, who is not expecting to make a withdrawal in the short term, moving to a fund growing its assets 2 to 3 per cent faster every year than the default funds could make a $400,000 difference by retirement age.

Booster's methods for getting default fund members to think about the long-term aren't "rocket science", because all it is doing is phoning people to talk through their options, he says.

"If you leave people alone they do nothing and that's the irresponsible part of that.
"[Other providers are] not trying to make a difference."

A big focus for Booster in the coming year is on financial education for its 100,000-odd KiwiSaver members. This extends to financial advisers helping members plan for the future.

Beattie says he makes no apology for Booster's slightly higher KiwiSaver management fees, when a proportion is being passed on to advisers, who members have access to for advice.

We believe 50 per cent of the people in default funds really shouldn't be there for the long term.


"We are happy to pay however much money to dentists, car mechanics and doctors to keep our engines and bodies ticking over and teeth clean, but we're not prepared to pay $100 a year to a financial adviser to check things out financially?

"I just shake my head and say: really there's a big challenge there."

The fixation on fees reminds him of a quote by philosopher John Ruskin: "it's unwise to pay too much, but it's worse to pay too little."

"The common law of business balance prohibits paying a little and getting a lot - it can't be done," pronounced Ruskin.

There will always be the cheapest offer, says Beattie, but there are often catches that most people don't understand, which can change the outcome of your retirement funds.

He says there are also too many messages touting KiwiSaver as the basis for retirement planning, with the implication that retirees need more than $1 million saved to live comfortably.

Beattie says NZ Super should still be the basis for retirement, with any changes likely to have a 10 to 15 year lead time, meaning KiwiSaver becomes a top-up to super payments.
That way, not only does the lump sum needed from KiwiSaver become more achievable, but investors can afford to take a little more risk because their NZ Super is not at risk.

He says conversations with the right advisers can get short and long term savings on track for those who are years from retirement, but also help people close to or at retirement make the most of their funds.

"Without that they're just flying blind," he says. "They just don't understand the maths and the numbers and how it all works."

Saving by default:

• Nine default providers appointed in 2014

• All new KiwiSaver members who don't choose a scheme are automatically assigned to a default scheme

• Default schemes have a low-risk investment strategy

• The schemes were intended to be a "staging post" for retirement funds until KiwiSavers made a decision about their long-term saving strategy

• Close to 450,000 people - 17% of KiwiSavers - are in default schemes

• 36 per cent of KiwiSaver members are 18-35, but 44% of those in default funds are in that age bracket