On Wednesday Phillip Matthews and I presented to the Finance and Expenditure committee, on the subject of KiwiSaver. Like other presenters we identified some core problems: the delay in the commencement of deductions, the need for a focus on electronic systems (rather than paper), and the difficulty of making the timing also dependent on QCIV tax changes.
However, we were surprised that other submissions did not cover in any detail two otherr key requirements - those of the customer.
The first is for advice:
Advice is needed. Consumers find it hard to work out what they should save, for how long, and where to invest it for maximum benefit. These areas need to be addressed, and they are necessarily individual decisions. The answers will vary depending on the personal circumstances of the saver.
We are told that employers will have to do nothing but give a pack of information to the employee.
Yet, when we raise the issue of advice we are told - 'won't employers get advice for their worksites...' this, is in fact a great fear for employers: they either become unpaid advisers taking on a dangerous risk in providing amateur financial advice - or, they are required to buy advice and grant time for its provision.
The other issue is the risk of a lack of transparency:
For a variable, yet lengthy, period of time consumers funds will be held by the IRD. They may not know who their default provider is, precisely who has their fund, or precisely what the value of those funds is. This is likely to create a problem for the customer, who likes to know such things. Providing in the legislation protection for fund managers against reconciliation problems with the IRD is a useful last defence against discrepancies - but it will not help deal with calls from upset clients.