Carmel Fisher - Proposed KiwiSaver switching campaign counter-productive

Proposed KiwiSaver switching campaign counter-productive
I have to admit that I hadn’t paid much attention to the Productivity Commission, until they started making comments about KiwiSaver that I felt were a bit misguided.  

I investigated further and found that the Productivity Commission was established in 2010 with a laudable objective: “to provide advice to the Government on improving productivity … supporting the overall well-being of New Zealanders.”  You can’t argue with that.

The Commission has in fact been very productive.  Since its establishment, it has produced comprehensive reports on the regulatory performance of local government (29 recommendations), strengthening Trans Tasman relations (19 recommendations), improving the performance of international freight (26 recommendations) and housing affordability (33 recommendations).  

Now they have their sights on boosting productivity in the services sector.  If the Commission can find ways to improve service sector productivity, it will be one of their biggest achievements yet. The services sector represents more than 70% of the businesses and employment in New Zealand, and contributes a significant portion of our export revenue.

The problem, as the Productivity Commission acknowledges, is that the services industry is large and diverse, making it difficult to generalise.  So, they have narrowed their study down to ask whether productivity can best be lifted through a more open occupational licensing regime, through more customer driven competition, or through greater technological innovation and uptake.

This is where KiwiSaver cropped up. In considering whether consumers can be stimulated to drive greater competition in New Zealand services (and therefore improve productivity), the Commission thought there may be scope to develop a variation of the ‘What’s my number’ campaign used by the Electricity Authority, in the KiwiSaver industry.  This campaign, which encouraged people to check whether they could save money by switching electricity providers and then made it easy to do so, resulted in 28% more people switching their electricity company.  

Frankly I’m surprised that with such a wide frame of reference, the Commission has narrowed their enquiry to such a specific and (in my view) inappropriate topic.  The provision of electricity is a commoditised service, the provision of retirement savings is not.  The electricity that powers my bedside lamp does not differ if I change providers.  But the performance of my retirement savings account will most certainly be different depending on which provider I choose.  It is not simply a matter of choosing the cheapest provider of KiwiSaver – so many other factors need to be considered when selecting a KiwiSaver provider and scheme, not least being the range of investment options and the suitability for my particular circumstances.

The Government knows that KiwiSaver is not a commodity, and that is why they have introduced so much regulation around who can provide advice, what sort of advice can be given, and how important information (and not just the fee ‘number’) is to be published to enable the public to make informed decisions.

The Commission has encouraged submissions on the topic, and we have certainly shared our views.  Hopefully the Commission will find other ways to improve service sector productivity than encouraging frenetic switching between KiwiSaver providers.