Kiwisaver Markets Needs More Competition and Consumer Education

June 7, 2016 New Zealand Finance

A lack of financial knowledge among Kiwisaver customers could be leading to a lack of competition on the market, and, ultimately higher fees and lower returns.

New analysis conducted by researchers at the New Zealand Treasury indicate that Kiwisaver providers do not appear to be competing heavily on their fees or returns.

The researchers concluded that the market for Kiwisaver providers is relatively inelastic, and large established providers have little, if any, incentive to drop their fees to attract new customers.

There is also very little competition for returns among Kiwisaver funds, as these are often dominated by large and established balanced funds, which see little variance in investment targets between providers.

It was proposed that the lack of competition can be partially attributed to a lack of engagement and knowledge in the Kiwisaver market by customers, who may lack an understanding of some financial principals, or may view their Kiwisaver funds differently to their own savings.

It was suggested that competition can be improved by raising consumer knowledge on the overall effects of fees and fund performance, a move which will create more customer mobility, and, ultimately, competition and results.

Photo By: r. nial bradshaw