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Home / Business / Personal Finance

Inside Money: The unshiftables - stuck at home with default KiwiSavers

NZ Herald
11 May, 2015 11:50 PM2 mins to read

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David Chaplin says that although an incredible 44 per cent of those enrolled in a Kiwisaver scheme have changed from their default, shifting the rest will be a challenge. Image: Thinkstock.
David Chaplin says that although an incredible 44 per cent of those enrolled in a Kiwisaver scheme have changed from their default, shifting the rest will be a challenge. Image: Thinkstock.

David Chaplin says that although an incredible 44 per cent of those enrolled in a Kiwisaver scheme have changed from their default, shifting the rest will be a challenge. Image: Thinkstock.

Opinion by

Tamsyn Parker has done a great job of illuminating the difficulties KiwiSaver providers have in shifting members out default funds.

A telling statistic from the story shows that Mercer, which gets most of its members via the default process, had "convinced just 850 people [out of the scheme's 85,000 members] to switch in the nine months from July 1 to March 31" - equating to a 1 per cent success rate.

Read more from David Chaplin:
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From April a concerted campaign by the KiwiSaver provider has pushed a further 1,283 out of default status and into another, possibly more risk-appropriate, Mercer product: an over 50 per cent improvement in six weeks compared to the previous nine-month effort - quite impressive.

However, as the story explains, the numbers "do not include savers who have switched funds by moving to another provider".

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And that's an interesting little comment, which deserves an asterisk and a footnote.

Because the aggregate KiwiSaver statistics, published by the IRD, show that a large proportion of auto-enrolled members have made an active choice since first being shunted into a default fund.

According to the IRD stats, from the 2007 launch of KiwiSaver until the end of April this year 986,003 members have been automatically enrolled into a default scheme. But as at the end of April the IRD records only 556,061 members in default-allocated funds.

Based on mathematics, that shows almost 44 per cent of those originally defaulted into a KiwiSaver scheme have since made an active choice - an incredible statistic.

The IRD figures don't show whether auto-enrollees shift to a different fund offered by the original provider (probably not) or when they make the choice.

Discover more

Opinion

Inside Money: Why KiwiSavers can't fly to Australia

17 Mar 08:30 PM
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13 Aug 09:30 PM
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But perhaps the very act of auto-enrolment prompts some members to shift elsewhere, in the spirit of 'no one tells me what to do'.

The numbers also give a hint as to why providers struggle to move-on the rump default members.

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With the easily-activated defaultees already shifted, what remains are the pathologically-disengaged, the conspiracy-theorists, the unsaveable, the right-at-homes and the GNFAs (gone-no-forwarding-addresses).

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