Fixing the KiwiSaver information deficit only the start

14 July 2016

Fixing the KiwiSaver information deficit only the start

KiwiSaver members are taking an interest in their investments but more needs to be done to turn that interest into action, says Kiwi Wealth.

The Financial Markets Authority’s recent survey on how closely KiwiSaver members were reading their annual member benefit statements revealed a worrying lack of engagement with KiwiSaver schemes.

According to the survey, 21% of members had read their statement thoroughly, while 58% had briefly looked at it. Only 23% of members said they had checked to see if their KiwiSaver investment was on track to reach their retirement goals.

Kiwi Wealth Head of Retail Wealth and Marketing Joe Bishop said reading the annual statement was merely the tip of the retirement iceberg.

“One of the biggest contributing factors to the success of KiwiSaver is the level of involvement from the customer. But too many are being short-changed because they’re not getting enough information, at the right time, to make informed decisions.

“The annual statement is a good start but we see this this as a bare minimum. People should be able to find out at any time the lump sum and retirement income they are on course to receive, as well as how much money they’ve got in their investment and where their money is invested.

“Our customers receive monthly updates and can log-in and check their investment at any time. Our digital experience allows customers to see a detailed list of exactly what sort of investments make up their interest in the Kiwi Wealth KiwiSaver Scheme, down to the number of shares in specific companies. Those insights give people control over their investments and the ability to make informed decisions about their investment.”

Mr Bishop said the FMA’s survey had confirmed Kiwi Wealth’s own research that showed KiwiSaver members wanted more information on what their likely KiwiSaver balance would be at retirement. 72% of respondents said they would like to know what lump sum they were tracking towards, while 62% wanted to know what weekly income that lump sum would deliver in retirement.

“The onus is on providers to do more to interact with their customers and empower them to make good decisions.

“Showing people how much money their investment is estimated to earn them at retirement is a powerful insight. That’s exactly what our online forecasting tool is designed to do. It helps people make informed decisions because it shows members the estimated balance of their KiwiSaver investment when they retire and what it could mean in terms of annual income.

“It provides realistic options for people to see how changes to factors such as fund type and contribution level could influence the trajectory of their investment. Crucially, it allows them to act on that information and make changes, most at the click of a button,” he said.

Kiwi Wealth’s online forecasting tool uses a range of calculations and algorithms to estimate the future worth of a member’s KiwiSaver fund. It uses current balance, contribution rates, projected returns and other economic factors to calculate an estimate the lump sum and retirement income. These estimated future values are saved to the member’s online account so they can be viewed and updated at any time.

Kiwi Wealth recently partnered with the FMA, the Ministry of Business Innovation and Employment and the Commission for Financial Capability to conduct a behavioural insights trial. To commence in the coming weeks, the trial will assess different approaches to encouraging default KiwiSaver members to make an active fund choice.

ENDS

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