Inside Money: PC debate switches on (and off) to KiwiSaver

Many people have already figured out how easy it is to switch KiwiSaver providers. Photo / Hawke's Bay Today

As reported elsewhere the recent Productivity Commission (PC) interim report includes a couple of pars floating the idea of a central KiwiSaver switch infoline.

"Given that there are 50 different KiwiSaver schemes (FMA, 2012) there may be scope to further increase transparency by collating disclosure information in a single easily accessible location, which also provides information about how consumers can switch provider," the PC report says.

And while there's undoubtedly some merit in the concept of centralising KiwiSaver information (which to a certain extent already happens via researchers such as Morningstar) the PC overstates the case somewhat.

Yes, technically, the Financial Markets Authority (FMA) might have 50 KiwiSaver schemes on its register but the effective number is much less than that. As I detailed earlier this year, 11 of the 51 schemes on the FMA list were scheduled for demolition or amalgamation (since then another one, Fidelity, has joined the merger queue).

Of the effective 40 schemes about half again have a tiny membership base (less than 10,000 each) with the majority of members and money concentrated in the top five providers. As at March 2012, the three major banks with schemes at that time (Westpac, ASB and ANZ) plus AMP controlled about 65 per cent of all KiwiSaver assets.

While there's less KiwiSaver provider complexity than the PC suggests (although there is a much wider, and more difficult, range of investment choices within many schemes), a central register of key information would still be worth having.

When KiwiSaver schemes begin standardised quarterly reporting the quality of data should also improve (although the industry is still haggling over some reporting details such as how to determine certain performance information).

Interpreting that information, however, won't be as simple as comparing power prices.

According to the PC report, the power company switch campaign (which the PC modeled its KiwiSaver plan on) led to "a 28% increase in the number of users who switched power provider" in the first seven months it was on air.

But whether KiwiSaver members actually need more encouragement to switch providers is also moot - many have already figured out how easy it is to switch providers.

As the 2012 FMA KiwiSaver annual report shows, in the 12 months to the end June last year about 10 per cent of members (or 200,000), changed schemes without any official quasi-government nudging.