May 25 2007

Default KiwiSaver way not optimal

Employers worried about incurring blame if they choose an underperforming KiwiSaver scheme for their employees have a simple out.

They can ask an independent financial advisory firm for help, says Jamie Coltman, managing director of Integrate FS. That way they not only mitigate that risk he says, but get impartial advice and an added option of including financial education for their employees.

Mr Coltman was responding to an Employers and Manufacturers Association (EMA) statement that employers were angry about how quickly KiwiSaver would impact them. The association’s spokesman David Lowe warned employers not to choose a preferred KiwiSaver provider because employees might blame them if that provider showed poorer returns that other KiwiSaver funds.

Mr Coltman says the KiwiSaver scheme has been set up with six default providers for cases when an employee or his or her employer elects a preferred provider. The Inland Revenue, which will collect employees’ savings through its PAYE system, will choose one of the default providers in that case for the enrolling employee.

“The default option is not an option in our opinion,” Mr Coltman says. “It will not provide people with the investment profile they should be contributing to and could therefore distort their long investment returns and balance. There are better options and people deserve to invest in line with their specific investment profile, not be just dumped in the one pond. One size does not fit all.”

ENDS