Government Allowing KiwiSaver Members To Split Investments Across Multiple Schemes Is A Solution Looking For A Problem

The Retirement Commission’s recent report has further demonstrated how the government’s enthusiasm for multi-scheme KiwiSaver membership is a solution looking for a problem, says InvestNow general manager Mike Heath.

As Minister of Commerce and Consumer Affairs Andrew Bayly considers how to follow up pre-election claims that restricting KiwiSaver membership to a single scheme limits investment choice, the Retirement Commission’s Opportunities for Improvement report has correctly pointed out that this is already catered for through InvestNow.

“InvestNow’s solution already provides the added diversification benefit of splitting members’ KiwiSaver balances between different investment managers. By doing it through a single provider, people don’t have to remember all the different places they’ve put their money,” Heath says.

InvestNow provides members access to 40+ investments from 15 different investment managers within the same KiwiSaver scheme.

“The cost of changing the KiwiSaver ecosystem to allow members to participate in multiple schemes could be significant, and that cost may well be passed onto members,” Heath says. “It could be even worse for KiwiSaver members who don’t take up the option to split between schemes, if they had to front for any of that cost.

“The investment manager diversification benefit is a real one, but there is no evidence this system change would deliver benefits beyond what is already available today.”

Heath has further concerns that allowing members to be part of multiple different schemes would dilute the service they receive.

“KiwiSaver reform should ultimately be about enabling New Zealanders to maximise their returns for retirement. There are better ways to do this than by enabling costly, complex measures for an issue that has already been solved.”

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