Changes to KiwiSaver default funds announced today by the Minister of Finance and the Minister of Commerce and Consumer Affairs respond to concerns raised by New Zealanders during the Review of Retirement Income Policies, says Retirement Commissioner Jane Wrightson.
KiwiSaver fees and ethical investing were two areas Wrightson’s office, the Commission for Financial Capability (CFFC), was asked to study as part of the Review. Its recommendations were released in January.
Today Ministers Robertson and Faafoi said default funds would have to exclude investment in fossil fuels to be considered in a new procurement process starting later this year. The process would also incentivise providers to offer good value for money from fees, including low to zero fees for members with low balances, and present fees in ways that were transparent, easy to understand and comparable.
Wrightson said a CFFC survey of 2000 New Zealanders undertaken for the Review showed 74% of KiwiSaver members were interested in ethical investment. When it came to fossil fuels, 41% of respondents wanted them excluded from their fund, a figure which increased to 46% of younger members and to 49% of women.
“It was clear from the submissions we received during the Review that a significant number of KiwiSaver members want transparency about where their money is invested,” said Wrightson.
She was also pleased to see an emphasis on driving fees lower.
“Fees matter, especially for younger KiwiSaver members – in our survey 41% of 18-33 year olds told us fees were the second most important consideration after performance when selecting a KiwiSaver fund, yet many submitters felt they were being charged excessively. They also did not know how to tell whether the fees they were being charged were fair, or how they compared to other similar funds.”
The Review recommended excluding fixed fees from low-balance KiwiSaver accounts, and that annual statements display fee cost projections with a comparison against the average for that fund type.