28 January 2022

New default engagement requirements a cue for all KiwiSaver providers

Gillian Boyes, former Manager - Investor Capability

By Gillian Boyes
FMA Manager Investor Capability

While fee reductions and the change to a balanced fund mandate have rightly taken centre stage in Government default KiwiSaver provider announcements, I’m just as excited about the new default provider member engagement requirements.

The new requirements correspond with monitoring work we undertake and the consumer and behavioural research we’ve conducted. This work shows conversations (as opposed to generic information) about KiwiSaver get the very best results, and that people are more likely to take action when those conversations happen at relevant moments.

Specifically, the new default KiwiSaver managers will have to make sure they are talking to their members (with evidence of an advice conversation or equivalent digital advice experience) at these key moments:

  • When a member first joins KiwiSaver
  • After a member withdraws money for a first home
  • When a member is 10 years and one year out from reaching 65
  • Once a member has turned 65 to help them with decumulation decisions

Default KiwiSaver providers will also need to show us evidence of a planned series of engagement campaigns and activities at the following key milestones for members:

  • annual member statement
  • government contribution payments
  • during significant market volatility
  • as the member nears the end of a savings suspension
  • as the member approaches eligibility for a first home withdrawal
  • when a non-contributing member without an approved savings suspension has not made a contribution within the last 18 months
  • when a member reaches eligibility age.

Help for all KiwiSaver members?

These requirements will only apply to the new default KiwiSaver providers. But other policy changes, notably new financial advice laws should make it easier for all KiwiSaver providers to offer simple discrete pieces of advice around these key moments.

Every week, I talk to KiwiSaver members who are confused about even the most basic elements of KiwiSaver. I know KiwiSaver providers face the same challenge.

A common response is to suggest we teach KiwiSaver basics in schools. Our colleagues over at the Commission for Financial Capability are doing a superb job introducing just that change.

But that’s not going to help most existing KiwiSaver members.

I’m hoping the new default provider engagement requirements will act as a prompt for all KiwiSaver providers to think about how they better help their members. Surely over a 30-, 40-, 50 year plus journey of KiwiSaver a little bit of help at key moments is what Kiwis should expect after all.