How to choose a KiwiSaver provider?
As an employer, the law requires you to auto-enrol new employees into KiwiSaver, provided they are not already a member of a KiwiSaver scheme when they join you.
You also have a responsibility to deduct KiwiSaver contributions from an employee's wages. From 1 April 2008, you are obliged to make employer contributions to your employee's chosen KiwiSaver scheme.
As the employer, you may want to take the opportunity to select a preferred KiwiSaver supplier for your workplace, although your employees may choose any KiwiSaver provider that suits their needs.
If this is the path that you want to pursue, how does an employer go about choosing a KiwiSaver provider?
We've prepared a simple 5 step guide to help you choose.
Step 1 - Set your objectives;
Step 2 - Establish evaluation criteria;
Step 3 - Assess each provider;
Step 4 - Compare the providers;
Step 5 - Make your decision - choose your KiwiSaver provider.
All the KiwiSaver products listed on the Workplace Savings NZ website have their advantages and for different reasons will appeal to different employers as suiting their varying needs.
Step 1 - Set your objectives
The starting point is to set clear objectives.
What are you trying to achieve with a workplace superannuation scheme? Do you simply want to comply with your KiwiSaver auto-enrolment and payroll responsibilities? Then read no further.
Do you want to do more for your staff? Do you want to choose a preferred KiwiSaver provider on behalf of your staff?
Or do you want to go beyond the minimums required under the KiwiSaver law? Would workplace super assist you in attracting and retaining staff, or improve loyalty and productivity? Perhaps you want to do something more for your staff? Providing them greater benefits than KiwiSaver assisting them to save for their future, protecting them against certain risks along the way, or setting them up to retire with dignity?
To understand more about other workplace super options please click here.
Each employer will be different, in part due to the different composition of its workforce. Whether you want to choose a preferred KiwiSaver provider for your staff, or you want to go further, the following steps will help you along the decision pathway.
Keep your objectives in mind throughout this process.
Step 2 - Establish evaluation criteria
Agree on the evaluation criteria and their weightings. Are some criteria more important than others, or do they all deserve equal weighting? Here are 8 suggested criteria (in no particular order):
- Organisational credibility
- Fee levels
- Investment options
- Member services
- Employer services
- Investment performance
- Administrative capabilities
- Scheme flexibility
Step 3 - Assess each provider
Make a 'long' list of providers you think might be able to do the job. Examine each provider using your chosen criteria. You can do this by asking each provider to send you a proposal, or by looking at their website and written material, or simply look at the Compare Providers section of our website.
You might like to score each provider or simply use a tick and cross system. However you do this, remember you will need to compare the providers in the next step, so try to be objective and use the same standard when assessing each provider.
Some employers will find this exercise beyond their area of expertise. That's OK, as you can seek assistance from an independent professional consultant. You will need to pay for the service, but it's worth it to get the right KiwiSaver provider for you and your staff. Be sure to ask whether the consultant will receive any payment from a KiwiSaver provider if you end up choosing any particular provider.
Let's consider the evaluation criteria in more detail.
- Does the organisation have sufficient capital behind it to maintain and grow the business? Is it investing in this business or focused elsewhere?
- Is the organisation a large multi-national organisation, with an overseas parent, or a smaller NZ-owned operator? This may come down to a matter of preference based on size or personalised tailored service - both types of organisation will need to have the infrastructure and capability to deliver the services you require.
- Are there appropriate levels of corporate governance? What about risk management? Is there sufficient depth, experience and stability in management and staff?
- Who are the trustees? Are they independent, professional trustees with the relevant experience or does the scheme use the services of an independent and credible trustee company?
- What independent professional advice is sought and from whom (i.e. auditors, legal advice, accounting and investment consultant advice)?
- How much experience does the organisation have in providing workplace superannuation? Ask for some references.
- What are the fees? Identify all the fees involved (direct and indirect). Be sure to ask if there are any fees that have not been disclosed. Make sure to get confirmation as to whether they are before or after tax.
- Who receives the fees? Some funds pay commission or ongoing amounts to financial advisers or consultants.
- Will the fee levels change as the scheme grows? If they reduce as the number of members or scheme size increases, when will these reductions occur?
- Are the fees reasonable in the context of the services provided? How do they compare to other providers?
Please visit our Making Sense of Fees page for more help.
Choosing the right investment option is the most important decision for a member to make.
- Do the options sufficiently cover the risk return spectrum - for example conservative, growth and balanced? Is this complemented by a broader range of individual sector fund options? Is there a good choice of funds? Is there sufficient choice or too much choice?
- Does the material provided assist non-expert investors to make the right decision? Is it clear what returns can be expected? What are the risks associated with each option? What is the likelihood of a negative return?
- If there is more than one option for, say, the balanced fund, how does a member make a choice between them?
- Can the members change their investment option? If so, how often and at what cost?
- Does the provider have a defined process for reviewing the investment options and the investment managers they use?
- Does the provider supply both initial and regular investment advice? To what extent can the advice be considered to be good and unbiased?
- How good is the on-line product support? Can the member view their investment balances on-line? How much can a member do online? Is there an 0800 number?
- What is the regular reporting process to members? How frequent is it and what information is provided? Is there a member newsletter? If so, how frequently is it published?
- What sort of face-to-face service is available, if any?
- Are any other financial services or products available? What about financial education?
- How are the member services charged for? Do members pay directly for investment advice?
- How much help does the provider offer in establishing the scheme?
- What services does the provider offer to launch the scheme and who pays for that? Is the establishment process well documented?
- What assistance is offered to your payroll team, both at the start and on an ongoing basis? Is there an administration manual? Is there someone to call if you have a query?
- Do you get a specific relationship manager?
- What sort of employer reporting is provided and how often?
- Are any online employer services available?
KiwiSaver started on 1 July 2007 and schemes are yet to establish an investment track record, so:
- Does the provider have a past investment track record?
- Many KiwiSaver providers offered other workplace super schemes before 1 July 2007. Can they show you the past performance of investment fund options similar to those offered in a KiwiSaver scheme? If so, look at both short and long term performance. Make sure the numbers are after tax and fees - in other words, what the members actually received;
- Is the performance what you would expect? How consistent was it?
- How does performance compare to other funds with a similar make-up? Is there a track record of consistent, above average returns?
- If there is an active investment management style, is the fund out-performing the benchmark? If there is a passive investment style, is the fund matching the benchmark? These comparisons should be after tax and after fees;
- How have the underlying investment managers performed compared to their peers?
- Is there any outside audit of the provider's administrative performance?
- What IT system does the scheme run on? What are its capabilities? Is there a development path? Is this a well-known platform used by other schemes? Where are the support services for software changes based?
- What disaster recovery and backup systems does the provider have to ensure that member records are protected?
- Is there a track record of fixing operational problems, without affecting investors' savings? For example, some workplace superannuation providers have made mistakes with unit pricing. Has your possible provider? What was its response to the problem and who ultimately paid (shareholders or other members)?
Step 4 - Compare the providers
Having completed your assessment of each provider, you are now ready to compare them with each other. If you have used a scoring system you will be able to rank providers based on their overall score. If your analysis is less mathematical, the ranking process will be more intuitive.
Try using our Compare KiwiSaver Providers tool on this website.
This step might require you to go back to some providers to ask questions or clarify certain aspects.
You might find that one scheme stands out above all others as the right one for you, or it might be that several appear to be about the same. Regardless, it's a good idea to meet with at least one provider before making a decision. Often employers will make a short list of providers to interview. A good short list might include different types of providers, not just those that scored the best.
People chemistry or the feeling that ‘these are people we can work with', may be as important as ranking systems. An organisation that comes across well on paper might be less impressive in person, or vice-versa.
Step 5 - Make your decision
Now comes the best part - choosing a KiwiSaver scheme.
The Workplace Savings website is a good place to start looking at the various KiwiSaver providers and KiwiSaver schemes available in the market. For more information contact the KiwiSaver providers directly, or go to the Inland Revenue KiwiSaver website.