KiwiSaver providers are struggling to move savers out of the default funds despite a requirement by the Government to give people more information on their choices.
In July nine financial services firms were awarded default status by the Government for the next seven years guaranteeing them new members. But a new condition of the appointments was that the firms provide investor education to encourage savers in the default funds to consider if they are putting their retirement savings in the right place.
Default funds are conservatively managed and are restricted to having between 15 and 25 per cent of their money invested in growth assets such as shares and property.
The Government sees the funds as a parking space until a saver decides for themselves where best to invest.
But savers are being enrolled into the funds and staying there, leaving questions over whether they will have enough money by retirement.
In 2012 ANZ research put the difference over a lifetime at about $72,000 for a person who stayed in a conservative default fund versus a person who started in a growth fund and then reduced their risk by changing funds over time as they got closer to retirement age.
Major bank Westpac had 5000 savers come into its default fund between October last year and March 31 but managed to convince just 38 people to move to another fund.
BNZ, which was allocated just under 4500 during the same time frame, managed to get just 89 savers to switch.
Westpac, BNZ, Fisher Funds, Grosvenor and Kiwibank were all new appointees to gain the default status. But even those with experience have low switching numbers.
Mercer, which had just under 85,000 people in its default fund as of March 31, convinced 850 people to switch in the nine months from July 1 to March 31.
A spokeswoman for Mercer said it had since run a campaign in April encouraging 40,000 default members to complete a risk profiling tool after which they could switch to another fund.
Of those 1283 chose to change their fund. The figures do not include savers who have switched funds by moving to another provider.
Ana-Marie Lockyer, general manager ANZ wealth products and marketing, said getting hold of the right contact details was a stumbling block to start with as it had to rely on information from the Inland Revenue and employers for default members.
Lockyer said it was difficult to put a number on how many people should be in the default schemes without being aware of how many people intended to use KiwiSaver to buy their first home.
First-home buyers are encouraged to leave their money in conservative funds to ensure their savings are not exposed to higher levels of risk over the shorter time frame.
The bank's lifestages scheme which bases a person's fund on their age only puts those aged over 60 in a conservative fund similar to that of the default funds.
She said people needed to understand there were a number of levers which affected how much savings would be in their retirement pot and the sooner they acted the far more effective a change could be.
Allan Yeo, managing director of Grosvenor, which had one of the highest switching rates, said it had a goal to ring every single new member allocated to it but despite running a call centre until 8pm at night could only get in contact with about 60 to 70 per cent of people.
Those who chose to switch were given access to a financial adviser who was not employed by Grosvenor. "We can only give so much advice over the phone."
Yeo said it was a crying shame the number of people who had sat in default funds over the past five years in what had been one of the greatest rallies sharemarkets had seen.
Michael Littlewood, co-director for the Retirement Policy and Research Centre at Auckland University, said when he saw the requirement for the default providers to give investor education he saw it as merely window dressing.
"The providers will do enough to tick the boxes and nothing more, and who can blame them."
Littlewood said it was clear that what was being done around educating the public about how much to save for retirement was not working.
"It's a very complicated subject that can only be addressed at an individual level.
"Unless you can sit a financial planner down in front of every person it won't work, and that's not going to happen. We've got to think of smarter ways."
But the government department in charge of overseeing the default provider requirements appears to be happy with progress.
A spokesman for the Ministry of Business, Innovation and Employment said it was too early to draw any clear conclusions on how the nine default providers were performing in the education space. "However, early signs are encouraging."
The new default providers - Westpac, Grosvenor, BNZ and Kiwi Wealth (Kiwibank) - had reported back to the Financial Markets Authority only once so far because members were allocated to schemes only in October, the spokesman said.
"This reporting process does not involve meeting specific targets relating to the percentage of people shifting from default funds to other funds - it is all about ensuring that investors make appropriate investment choices for their individual circumstances."
The spokesman said the FMA had seen initiatives from all default providers including calling all new default members, sending out welcome packs, putting up website resources such as calculators and case studies and encouraging members to call a financial adviser.