A financial adviser has urged the Government to rethink the KiwiSaver rules and bring all transfer waiting times onto equal ground, saying it is “ridiculous” that some providers can hold money in transfer for up to five weeks.
Current legislation states that KiwiSaver providers must complete transfers within 10 days when transferring out of a default fund, and 35 days for non-default funds. According to KiwiSaver Investment Committee Chair Martin Hawes, the difference is nonsensical and forces New Zealanders to wait unreasonable amounts of time to access their money for no good reason.
“If KiwiSaver providers can transfer from one type of fund within 10 days there is no reason they can’t do it for other types,” Hawes stated.
“It’s ridiculous that providers can hold on to money for five weeks when they should be able to make the transfer in five days. After all, it’s not their money. Banks can transfer money in a day (at most) – KiwiSaver transfers are probably a bit more complicated but five days seems reasonable; five weeks is certainly not reasonable.”
Hawes says that as Kiwis become more savvy about how to maximise their KiwiSaver potential, more and more will want to switch into funds more suitable to their needs. However the long waiting period throws up an unnecessary hurdle, and Hawes says that regulations should be updated to reflect the evolution of the scheme.
“The KiwiSaver land grab is over – 2.9 million people have signed up to the scheme,” he explained. “We’re now in the business of educating people about the importance of being in the right fund and encouraging them to move to a provider who has the best fund for them, but the regulations are completely out of step with this.”
“I don’t believe you can justify the extraordinarily long time that providers have to transfer the money for people who have decided to switch. It is unfair on KiwiSaver members who are trying to do the right thing and wanting to move to a more suitable fund.”
“KiwiSaver is supposed to connect people to their money,” Hawes concluded. “But this can be obstructed when some providers are allowed to drag their feet.”