As an employer, you have an opportunity under the KiwiSaver legislation to select a preferred KiwiSaver scheme for your workplace.
This means that new staff that are automatically enrolled, or existing staff that choose to opt-in to KiwiSaver, will become members of your company's preferred scheme (rather than being randomly assigned to a default scheme) if they don't make a choice themselves.
There are advantages that come from choosing a preferred scheme. Here are some of the things that have been highlighted by providers and commentators:
It is important to bear in mind that employees that opt into or are automatically enrolled in KiwiSaver are not obligated to join their employer's chosen or ‘preferred' scheme. Having a preferred scheme simply means employees that do not make a choice themselves are assigned to the preferred scheme rather than randomly assigned to a default fund.
A number of employers who have nominated a preferred scheme have done so on the basis of the strength of an existing financial services relationship.
Some employers have not chosen a preferred scheme because they are concerned that this may make them liable under regulations governing the provision of ‘financial advice'. In legal terms, this is not a worry as KiwiSaver legislation specifically excludes the selection of a preferred scheme from the definition of ‘financial advice'.
In practical terms, however, employers may find themselves in a position of having to defend their choice of a preferred scheme, e.g. at times when investment returns are less than expected by employees. This is another reason why some employers have decided to forego choosing a preferred scheme, leaving the responsibility for choosing a scheme entirely in the hands of their employees.
The process of choosing a preferred scheme can be as simple or complicated as you want it to be. In comparing schemes, there are a few things you'll need to evaluate:
Employers may choose to either review and select a preferred scheme themselves or appoint an independent consultant to assist them in this process.
As a starting point, the IRD maintains a current list of providers with KiwiSaver schemes open to the public. In addition, there are some KiwiSaver schemes whose membership is limited to particular industries, unions or associations. An example is the IRIS-GMK scheme open to union members and their immediate families.
Additional detail on providers, schemes and investment options is available online at www.sorted.org.nz.