Investment watchdog the Financial Markets Authority says it will keep a close eye on the wind-up of ANZ's Bonus Bonds scheme and has asked the bank to be mindful of the impact on vulnerable customers.
ANZ on Tuesday said it would no longer accept new money into its Bonus Bonds scheme and will wind it up by the end of October citing low interest rates as the reason for the closure.
There are 1.3 million New Zealanders with $3.25 billion invested in Bonus Bonds which was first set up by the New Zealand Government through the Post Office in 1970.
ANZ bought the scheme in 1990 but has faced heavy criticism in recent years for the fees charged on it.
Its 2019 annual report shows the bank paid out $39.6 million in prize money for the year to March 31 but also took $40.7m in fees and expenses.
At the same time the odds of winning any money in its monthly prize draws have been falling. Last year the average odds were one in 32,294 of winning a prize in any given month, down from one in 26,875 in its 2018 financial year.
Last year an ANZ staffer wrote to the bank's chief executive Antonia Watson and board concerned about the product and calling it the "biggest rort in financial services in New Zealand" and asking for the fees to be cut.
ANZ cut the fees on Bonus Bonds in July last year from 1.15 per cent to 0.88 per cent but said it made the decision to do so before receiving the anonymous letter from the employee.
Last year the Financial Markets Authority confirmed Bonus Bonds were in its sights as part of its work around legacy products that may no longer be suitable for investors.
An ANZ spokesman yesterday said the wind-up of the scheme was not due to pressure from the regulator.
"This was a decision of the ANZIS Board and the FMA has been advised."
An FMA spokesman said during its conduct and culture reviews of the banks it had raised the issue of legacy products that were potentially low value for customers and asked all providers to review legacy products with that in mind.
"We understand ANZ's decision regarding Bonus Bonds is not directly linked to current legacy product reviews."
But the FMA spokesman said it would continue to monitor progress and engage with ANZ and its supervisor as the wind-up progresses.
"ANZ has been keeping the FMA informed as the bank considered the performance and future of Bonus Bonds.
"ANZ has assured us that customers' interests have been foremost in its decision making."
The spokesman said the FMA had asked ANZ to consider the impact of closure of the scheme in the current environment.
"...particularly as this relates to potentially vulnerable customers, and those who may require support to identify suitable alternative use for their funds when their Bonus Bonds are redeemed."
Many Bonus Bonds are held by older New Zealanders or have been bought by grandparents or parents for their children as an investment.
Some rave about the product but many complain that despite having the bonds for many years they have never won anything. The bonds don't pay interest but owners go into a monthly draw to win prizes of up to $1 million.
Prizes that are not claimed are recycled back into Bonus Bonds and last year the bank admitted some 2000 deceased people were bondholders.
An ANZ spokesman said it would be writing to all customers over the next fortnight to update them on the decision.
"If we do start the wind up process, part of the process will include efforts to find people who have lost track of their Bonus Bonds, including estates.
"At the end of a wind up any customers who we haven't been able to contact will have their funds passed to the Treasury as unclaimed monies. As always we encourage anyone who thinks that they or a deceased relative have lost Bonus Bonds to contact us."
How to cash in your Bonus Bonds
• ANZ customers can cash in their bonds online if they have an active mybonusbonds account by logging in selecting the cash in my bonds option. They can either select an existing bank account number or add a new account to have the money deposited into.
• ANZ customers without an active mybonusbonds account need to complete a contact form on the Bonus Bonds website or call the contact centre 0800 266 374.
• Non-ANZ customers with an active mybonusbonds account can redeem online by selecting 'Cash in My Bonds'. You can either select an existing bank account number or add a new bank account number to have the funds deposited into.
• Non-ANZ customers who do not have a mybonusbonds account must visit an ANZ branch (while being aware of Covid restrictions) and present ID and proof of your address.