Automation could reduce KiwiSaver transfers to less than a week from the current month-long process, according to Tony Nejasmic, Calastone head of business development in Australaisa.
Nejasmic said the clunky, labour-intensive KiwiSaver member transfer system was ripe for streamlining with a number of providers sounding out Calastone for a solution.
Calastone, the UK-based fund processing specialist firm, launched its core ‘order routing’ product in NZ this May, securing a range of clients including fund admin firm MMC as well as wrap providers Aegis and FNZ.
“As part of our discussions with NZ clients the issue of KiwiSaver transfers came up as a pain point for providers,” Nejasmic said.
Under the KiwiSaver law, providers must effect a transfer within 35 business days of receiving a member request – a deadline even some of the larger schemes still struggle to meet.
“We believe automation could bring the transfer of member information down to under a week – and ultimately to a couple of days,” Nejasmic said.
He said the KiwiSaver transfer problems mirrors similar issues facing wrap accounts in Australia where member data can take six to eight weeks to shift between platforms.
Calastone is currently piloting a system in Australia to automate ‘in-specie’ transfers between wrap platforms that could easily be adapted to KiwiSaver, Nejasmic said.
“We’re in high-level talks with a number of KiwiSaver providers about how we could do that,” he said. “… There’s not a lot of adaption we’d have to do, we’d use the same ‘pipes’ but just have different information fields.”
A recent case-study looking at MMC published on the Calastone website, says the group had been “working closely” with Australasian clients to develop Calastone Transfers for the Antipodean markets.
“In both of these regions, asset transfers remain highly manual and subject to high operational cost,” the MMC case study says.
Essentially, Calastone would offer a “matching service” between providers, Nejasmic said, removing the need for a convoluted exchange of various paper-based documents to approve a transfer.
As well as significantly reducing the transfer time, automation would also reduce the error rate and bring down costs, he said.
According to industry sources, each KiwiSaver member transfer can incur admin costs of between $10-20. Inland Revenue Department statistics show about 140,000 KiwiSaver members swapped schemes over the 12 months to June 30, 2016.
“Large providers are doing transfers day in and day out,” Nejasmic said. “But both big and small schemes would benefit from automation.”
He said the proposed Calastone member transfer solution would be more effective with broad support from KiwiSaver schemes. There are about 30 KiwiSaver schemes, offered by close to 20 providers with 14 underlying administration systems.
Nejasmic said while it was still “early days”, if the KiwiSaver industry backs the proposal, Calastone could have the transfer system in place some time next year.