Around 230,000 KiwiSaver default scheme members are due to have their details passed to a new provider in the next week but their savings could take until February to catch up.
On Wednesday five providers – ANZ, ASB, AMP, Fisher Funds and Mercer – who lost their default status as part of a government tender process will have to send the Inland Revenue Department a list of their default members.
Those members’ details will then be redistributed to the reappointed providers – BNZ, Booster, BT Funds Management (Westpac) and Kiwi Wealth and newly appointed providers, Simplicity and Smartshares (NZX).
But the old providers legally have up to 75 days to cash up the investments and then transfer the proceeds to the new providers.
Sam Stubbs, managing director of Simplicity which has been appointed as a new default scheme provider, said it expected to receive the details of the new members by around December 6.
Stubbs said the IRD would decide how the members being transferred would be distributed.
“Then there will be a very large influx of members on the 5/6th of December. Exactly who that is we don’t know yet. We have been given indicative numbers.”
Stubbs said they had been told to expect around 38,000 new members.
He said every new member would get a letter dated December 6 saying who their new provider was.
KiwiSaver providers have complained in the past how hard it is to get accurate or up to date contact details for some members which could mean some of those who get transferred won’t be aware of it happening.
Stubbs said part of its ongoing commitment as a default provider was to try to get in contact with those members.
“There will be people who don’t have email. Our strategy is to email, then text if we have a number, then if you have an address then you write a letter. But some of them will be uncontactable because they don’t want to be contacted, or are just uninterested in being contacted.”
He predicted those members would be an ongoing challenge for providers.
Stubbs said the former default providers then had up to 75 days to send the funds.
“But most parties have indicated they want to get this done and dusted a lot sooner than that and we would expect to have the bulk of the money from the members by mid-January.”
/cloudfront-ap-southeast-2.images.arcpublishing.com/nzme/3HEZLSCXS3J44ZE7D2HMYXP2XQ.jpg)
Hugh Stevens, chief executive of Smartshares, which is owned by the NZX, and is also a newly appointed provider, said its team was quite keen for fund transfers to all be done by Christmas.
“It is completely up to the exiting providers, but if I was in their shoes I would be saying I want to be sensible about trading, and so I can’t commit to any particular day but equally you want to be efficient and do as much of it in as short a period as possible.
“I think if you balance those two things we are expecting it to happen in the first couple of weeks, there is no particular reason to hold off. I don’t think those providers really want to spin this out any longer than they have to.”
Most of the assets which the exiting default providers will need to cash up will be bonds and fixed interest investments as the money is currently invested in conservative funds.
But under the new default appointment the funds will be balanced meaning they will have a higher percentage invested in growth assets like shares and property.
Stevens said the share market’s recent drop would be advantageous to those buying more shares as they would be able to buy more shares for their money.
“What has happened of the last few days is helpful to them.”
A spokeswoman for Inland Revenue said there were just over 233,000 default allocated members affected by the change as of October 31.
“Inland Revenue will have the final numbers on the 1st or 2nd of December.”
She said providers were responsible for transferring members and their funds.
“Outgoing default providers will be sending IR [Inland Revenue] a list of their default members which we will be checking against information we hold.
“IR will then reallocate default members to a new provider and tell members who their new provider is. We’ll also tell those new providers about their new members, including which scheme they have come from.”
A spokesman for AMP Wealth Management said it intended to fully comply with the process for transferring KiwiSaver members in its default fund to the new default providers, as prescribed by the Ministry of Business, Innovation and Employment.
“On 1 December, we will provide details of members in our default fund to the Inland Revenue Department, who will then allocate them to one of six default providers on 5 December. We then have 75 days to complete the transfer.
The spokesman said it had around 65,000 customers in its current default portfolio representing around 5 per cent of its total assets under management and 2 per cent of its total revenue.
A spokeswoman for ANZ said it would be transferring around 45,000 member’s funds to incoming and remaining default providers with the process able to take place between December 2021 and February 2022.
“Members are allocated a new provider by the Inland Revenue when the process begins and member’s funds can then be transferred to that provider by ANZ during the transfer window.”
A spokeswoman for ASB declined to say how many members were in its KiwiSaver default fund and referred the Herald to the Financial Markets Authority.
Fisher Funds expected around 36,000 members to be transferred out while Mercer did not reply in time for deadline.
When the new default providers were announced in May there was some concern that the providers who were set to lose the default status would mount campaigns to convince those members to switch to their other funds – a decision which may not have been in the best interests of the member due to the new default providers having much lower fees.
At the time the FMA said it would “continue to monitor the current default providers to ensure they act in the best interests of members through the transition.”
Asked if there had been any concerns about the behaviour of those losing the default status since then an FMA spokesman said it was comfortable that providers had ceased their proactive activation efforts for default members by September 30.
“We have asked, as part of concluding our regular default monitoring engagement with the current group of providers, for providers to show us how their activation of default members prior to end of September was completed in the best interests of members.
“We also understand that some of the increase in active default members this year has been prompted by the members approaching providers, reacting to increased communications from providers, and media coverage, about the changes to the default schemes coming into effect this week.”
Source: Read Full Article