KiwiSavers free to choose?

Institute of Financial Advisers concerned about KiwiSavers being strongarmed to accept 'preferred provider'

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Institute of Financial Advisers concerned about KiwiSavers being strongarmed to accept 'preferred provider'

15th Mar 11, 10:03am by Amanda Morrall

By Amanda Morrall

An incident of a KiwiSaver being forced to change providers in order to receive additional workplace subsidies above 2% has the Institute of Financial Advisers (IFA) crying foul.

IFA president Nigel Tate said he was alerted to the practice by a client who was told that in order to qualify for Genesis Energy's 4% employer contributions, he would have to change providers.

Initially doubtful, Tate said he rang the human relations department at Genesis (which employs 1,000 staff) to clarify their policy on KiwiSaver.

"I got a phone call back and they said: 'Yes, that's correct. We have a preferred supplier and if he wants to get the subsidy, he has to use our preferred supplier.''

A spokesman for Genesis said while the company had a preferred provider relationship with ASB, it did not compell employees to use them.

"Genesis provides a range of superannuation/KiwiSaver options for its employees,'' said public affairs manager Richard Gordon.

Tate said corporate policy was clearly out of line with what was happening at the coal face.

"It's very concerning. They obviously have inconsistent rules between headquarters and regional offices.''

Not wanting to jeopardise his client's opportunity to receive 4% employer contributions, Tate said he dropped the issue, but wondered if it was happening with greater frequency.

"I suspect there might be a bit more of this going on given there's quite a few that have preferred providers.''

The Inland Revenue Department confirmed it was illegal for employees to be forced to go with particular provider, regardless of 'preferred' status.

The KiwiSaver Act clearly states that an employee has a 'choice of whether they join their employer's chosen scheme or another KiwiSaver scheme, said a spokesperson for IRD.

Inland Revenue said employers trying to influence or interfere with employees freedom of choice should be reported to the Department of Labour or if the employee was unionised to their respective union representative.

Employees automatically enrolled in KiwiSaver are provisionally allocated to their employers' chosen scheme or a default scheme. However, the KiwiSaver acts gives employees the legal right to change providers at any time.

"The employer is required under the KiwiSaver Act (section 101A Sub-Part 3A) to pay a compulsory employer contributions and in terms of section 101B the employer has a `duty of good faith' when entering into the employment contract with the employee.''

Aggrieved KiwiSavers are also able to lodge a complaint through a dispute resolution service now required of providers. For further information see the Companies Office website.

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5 Comments

by Walter | 15th Mar 11, 10:43am 1300139022

In the future the bigger issue will be the compliance differences between non aligned financial advisors, employers and the non AFA advisors that work for banks and other QFEs where they have no choice in product provider.

One group have to be trained and spent hours with the client, then provide a written report (this all costs money). The employers have very low requirements and the tied QFE advisers are somewhere in between. Will Joe public know the difference?

by Ms de Meanour | 15th Mar 11, 11:13am 1300140795

Worth noting that in this case the employer, in offering 4%, is voluntarily doing more than he is obliged to by law, which requires 2%. Seems to me that somebody who is offering something that they don't have to offer, should be allowed to attach whatever conditions they like to it.

Was the case perhaps that employees could take the compulsory 2% and go with whatever provider they preferred, but could only get the 4% if they went with the company's preferred provider?

by Black Celebration | 15th Mar 11, 1:55pm 1300150554

I think this is bit weird because even with a preferred provider agreement in place, the employer cannot direct employees to one KiwiSaver provider. All members automatically enrolling can be aligned to one provider - but after that, it's the members who control their own KS membership.

Even if the employer wants everyone in the same scheme, and pay more than the statutory 2%, all KiwiSaver contributions are paid via payroll to the Inland Revenue. The employer does not know who the member's ultimate KiwiSaver provider is. Even if the member told the employer, voluntarily, that there are with X provider - the member has every right to switch to Y provider tomorrow.

by lakeside | 15th Mar 11, 5:01pm 1300161691

HR departments are a law unto themselves. I have had no Kiwisaver problems but my employer a big govt dept still doesn't do the automatic charitable donation thing costing me hundreds. And it is govt policy! Well Peter Dunns bit of govt anyway...

by Neil Smith Life Risk | 15th Mar 11, 10:14pm 1300180452

This is the type of "patch protection" that happens in big corporates. One person gets something into their head, and in the absence of quality advice, provided by a trusted source, and delivered with integrity, stuff happens.

And that is why we need more advice on KiwiSaver, frequently accessed from a "brand free" environment, delivered with a user's perspective.

Let's move on. It was illegal. It was protectionist, and now everyone who ought to know knows, and hopefully the IRD or the securities commission give them a follow up phone call, and the case can be dismissed as a an administrative foul up.

If I got $10 for every KiwiSaver misconception I've heard, I'd be a happy man. Let's thank Nigel for making the phone call and bringing this to someone's attention. Good on you Nigel Tate. : )