Source: Radio New Zealand
The bank’s cash fund returned 2.8 percent a year over the past 10 years, compared to 4.2 percent for its conservative fund. File photo. 123RF
A woman who did not realise that her KiwiSaver was mistakenly in a cash fund for more than a decade is taking her complaint to the Banking Ombudsman.
Amanda Pringle said she was contacted by her bank, Westpac, in 2014, after she received $17,000 in back payments she was owed in child support.
She went to an appointment with her bank and was signed up to KiwiSaver for the first time.
It was only this year when a friend suggested she look at switching her KiwiSaver that she found she was in a cash fund, with a total balance of about $50,000, despite increasing her contributions to 6 percent of her income.
Morningstar data shows Westpac’s cash fund has returned 2.8 percent a year over the past 10 years, compared to 4.2 percent for its conservative fund, which Pringle thought she was in.
If she had not made a choice and had joined KiwiSaver the next time she changed jobs, she would have been placed in a default fund.
Westpac’s default fund has returned 10.9 percent a year over three years.
Pringle said the staff member who enrolled her in KiwiSaver did not explain how different funds might perform. “I trusted that she had my best interests at heart – I also had minimal life insurance and she upped that, and sort of talked about you know, you’ve got two children it’s important to do that.
“I didn’t really understand the terminology that well because I do struggle to process things along those lines, with a car accident I had when I was 16.
“I haven’t had anyone helping me to understand the terminology financially and I thought they would have my best interests at heart.”
She said even if she was given information noting she was in a cash fund, she would not have known what that meant. “I just thought our verbal discussion was enough to know that she had my best interests at heart and I was signing there because I felt like she was basically trying to help me out.”
When she was able to, she increased her contribution rom 3 percent of her pay to 6 percent, thinking it was the right thing for her retirement. “I was doing what I could and I did receive letters but to be honest I wouldn’t have understood how it worked.”
When she understood what happened, she said, she was “absolutely gutted”.
“I’ve just started online banking in the last few years when I got a new phone and so I didn’t really know, [a friend] said to go in and have a look and see because he thought that it was strange that I had worked so long and not made a lot of interest on it and he said oh my god you’re in a cash fund. I wouldn’t have known what it meant but I felt really annoyed because they had rung me out of the blue to come in and see them.. they’ve done me no favours whatsoever, it’s cost me big money.”
She said if she had been left to default in, she would have been much better off. “I just felt really, really upset.”
Westpac said it would not uphold her complaint.
It said it had looked at how KiwiSaver accounts were set up for Pringle in 2014.
It said when staff helped customers join KiwiSaver their role was to explain how it worked and provide the relevant information and paperwork. “They are there to help customers understand their options however they cannot choose a KiwiSaver fund or tell a customer which fund to select as this is formal financial advice.”
The bank said a recommendation could only be given if a customer chose to receive formal financial advice.
“Where formal financial advice is not being provided the choice of KiwiSaver fund is made by the customer and recorded on the application form. Customers can also review and change their KiwiSaver fund at any time after their account has been set up.
“Regular KiwiSaver statements were sent to you over the years which clearly showed that your savings were invested in the cash fund. The statements also include contact details and explained that you could get in touch with us if you had any questions or needed help reviewing the information.”
It said it had not identified a bank error in how the account was set up or managed.
Pringle said she felt that even if the bank had acted according to its rules, someone should have contacted her about the decision and explained the potential impact.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
