People's motivations to change from one scheme provider to another are various, and though some of the reasons given can seem a little off-beam, even downright stupid, they obviously felt them important enough to justify filling out the (relatively simple) paperwork.
One project by the Inland Revenue Department last year gave some insights, though it was actually designed to find out what those eligible to take money out of KiwiSaver were choosing to do with it.
Market researcher Colmar Brunton was paid to interview 1000 KiwiSavers aged 65 or over, and one of the questions it asked was whether they had switched provider at any time, and why they did it.
A total of 12 per cent had switched.
17 per cent of the switchers had done so to switch from a default provider or a provider chosen by their employer..
17 per cent of the switchers said their reasons had included shifting for "financial advantage", which was most commonly seeking higher returns from another provider, or disgusted at the returns they had been getting.
Just 2 per cent said they were moving to get lower fees.
14 per cent had done so when prompted by a bank, a financial adviser, or a friend.
3 per cent said they had done so because a family member or friend worked for the new scheme provider.
11 per cent had done so because it was easier to have their bank handle their KiwiSaver too.
Some had had a switch forced on them. 8 per cent said their scheme had either closed shop, or been taken over, and 2 per cent said the fund they were in ceased to be offered by the scheme they were in.
7 per cent said they shifted in disgust at poor communication by their scheme provider. So what are good reasons for switching?
Moving because your sister works for a scheme provider is no reason at all. Convenience is a poor reason, as the convenience of being able to check your balance on the same web page as your transaction account is small worth compared with having an adequate nest egg in retirement.
The KiwiSaver scheme you are in should be the one you expect to produce the returns you need to deliver the savings you think you need in retirement.
Only motivations which you think will put you in a better fund are good reasons.
- Sunday Star Times