KiwiSaver

Advisers are worried about banks moving in on their turf with home loan offers that require customers to have multiple products with the lender.

One adviser, who did not want to be named, said he lost the KiwiSaver account of a long-standing client when he was offered $1500 towards his mortgage if he brought a new product to TSB, which offers Fisher Fund KiwiSaver.

“This wasn’t a written offer or condition of getting the mortgage but he was given the money once he’d signed it across,” the adviser said.

“He obviously felt pressured as he apologised to me, but I agreed he was best to do it, as in the short term it is an obvious decision. Because it’s not a wise move for him longer term, we’re going to bring him back and – to cover ourselves – now need give the appropriate documented advice to do so.”

TSB chief executive Kevin Murphy said he was not aware of an incentive being tied to KiwiSaver, although the bank does offer cash incentives up to $1500 for new mortgages.

When BNZ rolled out its one-year rate of 4.35 per cent earlier this month, it came with the condition that the customer had their everyday banking and one other product, such as KiwiSaver, with BNZ.

Westpac requires that customers have a transaction account, plus a credit card or Westpac insurance product to access its two-year rate of 4.69 per cent. For ANZ’s matching rate, the conditions are the same.

Financial Markets Authority spokesman Andrew Park said it was important that consumers understood the merits of the products they were signing up for as much as they understood the merits of the incentives.

A key point would be whether people were being encouraged to cancel their product with one provider and take it out with another, or just to have products with the bank.

“We are concerned about the level of information, support and access to financial advice that is provided to bank customers when they are presented with the option to transfer or switch KiwiSaver schemes.  This is an ongoing focus for FMA’s work.  In this context KiwiSaver providers need to ensure that incidental rewards or incentives are permitted within the KiwiSaver scheme rules, that they help investors with active decision making and don’t distract investors from choosing a fund based on its merits,” Park said.

[UPDATED, ADDS GENERATE COMMENT] A financial adviser who used to manage a small KiwiSaver scheme says the pressure will be on Pie Funds if it launches into the market.

Pie Funds is believed to be planning to open a KiwiSaver scheme next year.

Pie’s funder and chief executive Mike Taylor was not available to confirm that.

It had reportedly been waiting to get enough funds under management to make the move.  It now has $250 million in FUM.

Norman Stacey’s firm, Diversified Investment Management Services, used to manage the Law Retirement KiwiSaver scheme, with just over $5 million in FUM and 382 members.

He said it would be a courageous step for Pie to enter the market. 

Diversified was recommended to take the LRKS scheme to Fisher Funds, which it did in the middle of last year.

“The FMA indicated they wanted fund managers with substantial assets to be running KiwiSaver schemes. The FMA certainly puts pressure on the little outfits,” he said.

But he said he would love to see Pie Funds succeed with KiwiSaver. “There is a lot of group think to KiwiSaver, they are much of a muchness if you deal with the big banks and providers.”

He said most were invested in similar ways and that could lead to systemic risk.

Stacey said KiwiSaver seemed to be a numbers game. “Generate is the only one I think of as being independent out there. I don’t think there are too many smaller ones left.”

Generate chief executive Henry Tongue said: “I think we need more KiwiSaver providers. Consumers will be the winners as competition will drive the industry to provide better products and service. Generate was voted Investment Provider of the Year 2015 by the PAA, we were ranked 1st for services earlier this year by Sorted and in the most recent FundSource tables our Focused Growth Fund was the top performing KiwiSaver Growth fund with a return of 27% for the year. Our Conservative Fund also topped the Conservative KiwiSaver rankings for the year. The net result of that is we are growing strongly with over 11,000 members and around $100m under management.”

KiwiSaver members expect their providers to offer them insurance, Mercer’s New Zealand managing director says.

Mercer has launched two new products that have additional benefits for people who are also members of the firm’s KiwiSaver scheme.

LifeProtect pays out in cases of death and terminal illness. BillProtect insures against inability to work due to redundancy, illness or injury.

Mercer KiwiSaver members who claim on either policy because they are off work will also receive a monthly contribution of $200 into their KiwiSaver scheme account.

The policies are underwritten by Cigna.

Mercer managing director Martin Lewington said research had shown people expected to be offered insurance by their KiwiSaver provides and were highly likely to buy it.

He said there was a high degree of interest in the product.

The policy price would depend on the personal risk profile of the person taking out the policy but would start at $15 a month.

The insurance contributions to KiwiSaver would be enough to give the insured customer the full member tax credit from the Government each year.

Lewington said the impact of the cover would then be amplified because the money would be invested until retirement.

He said the policy, the first KiwiSaver cover in the market, was a way to differentiate Mercer from its competitors.

“Differentiation is about innovation and focusing on customers.”

FMA wants New Zealanders to give their KiwiSaver accounts an online health check as part of Money Week.

It is directing consumers to its website, where it asks whether they know who their provider is, what type of fund they were in, whether their KiwiSaver account is on the right tax rate, how much they have in their account and whether they think their KiwiSaver account is government-guaranteed.

It offers more tools and information.

The FMA is also hosting a free event at Westfield Riccarton Mall in Christchurch, where people can take part in an interactive version of the KiwiSaver health check.

The FMA’s director of primary markets and investor resources, Simone Robbers, says it’s important that people check in to make sure their KiwiSaver investment is working for them and Money Week is a perfect time to do that.

“For many New Zealanders, KiwiSaver will be their first investment experience and may represent a large part of their retirement savings and ultimate financial security. Finding out what choices are available to you now could have a positive impact on your future,” she said.

“There are some essential things New Zealanders can find out about by completing the health check, such as understanding what type of investment fund they are in and making sure their prescribed investor rate (PIR) is correct.”

Money Week is a nationwide week of events that motivates New Zealanders to look at their financial situation and get their money into the best shape possible.

During the week, the FMA will also be releasing more findings from its joint survey with the Commission for Financial Capability into how well older New Zealanders are preparing for their retirement, and what they plan to do with their KiwiSaver when they reach 65.