New Zealand may not need KiwiSaver default schemes at all, one adviser says.
The Government is working through the process of appointing default providers for the next term.
There are nine default KiwiSaver providers, and their terms of appointment expire on June 30. About 715,000 people are in default funds and more than half have not made the choice to be there.
Being a default scheme is understood to give providers a reputational boost, but it comes with increased scrutiny and regulatory restrictions, particularly on the fees that can be charged.
But Clive Fernandes, an AFA who specialises in digital advice, said the idea of default schemes had passed its use-by date.
He said the review of default provider settings ahead of the appointment process had focused on the wrong thing.
“The KiwiSaver default scheme concept was required when three million Kiwis needed to be onboarded as KiwiSaver members in a short period of time,” he said.
“However, the situation has now changed significantly. Now that most Kiwis are already signed up to KiwiSaver and new signup numbers each year are lower, the 'default scheme' idea is no longer required.
“Instead, people should be given access to personalised advice right as they are signing up. We should be encouraging new entrants to make an active choice to best set them up for their future and specific goals. This would help to solve a lot of issues and would be in the best interests of members vs providers,” he said.