The KiwiSaver default scheme transition project kicked up a gear this week with BNZ first to reveal operational-readiness in switching on its MMC-built registry system.
In a release, Vedran Babic, MMC chief, said following a six-month build the BNZ default KiwiSaver registry service was now ready to handle the complex transition and ongoing administration duties when the new regime starts in December.
BNZ was one of the four incumbent default KiwiSaver providers reappointed for another seven-year term this May while two first-time schemes – Simplicity and SuperLife – also won government approval. At the same time, four existing providers – AMP, ANZ, ASB and Fisher Funds – missed the cut in a decision requiring them to jettison any ‘non active’ default members by December 1.
Babic said each of the six newly approved default schemes “is expected to receive approximately 40,000 new default members from the outgoing providers”.
“After the initial allocation of members the Inland Revenue will not be involved in the process. This will be managed between the outgoing and ongoing providers,” he said. “The industry has agreed a format to pass details of transferring members but the administrators to ongoing providers need to have the capacity and scale to deal with the volumes of transfers that are expected.”
As reported here, MMC picked up the BNZ business in May – replacing Trustees Executors – to add to the unit-pricing and other fund administration services it had supplied to the bank investment arm since 2008.
Babic said combining registry and unit-pricing, for instance, under a single administrator can lead to “faster processing times and a reduction in risk”.
“The provider offering both services can realise synergies which can be passed on to clients,” he said.
“In addition, there are benefits to investors from having a single system that has both investment and investor data. For example, a manager looking to raise investor engagement could utilise the linked datasets to drill through the layers of their fund structures to show investors their share of the underlying investments.”
Default KiwiSaver providers also have additional “reporting and investor communication requirements” that impose more complexity on the admin task, Babic said.
“This required extending our data models to capture this information,” he said. “There is also a regular allocation of new default members via Inland Revenue.”
Chris Watson, head of the recently created MMC Transformation Management Office (TMO), said the BNZ default service marked an “important milestone” for the unit.
“Data migration typically represents a challenge in any large transition project,” Watson said in the release. “As we have done a number of these transitions in the past, we rely on well-defined specifications for our data requirements and can leverage bespoke tools that we have built for translating and validating the data for a smooth transition.”
MMC provides administration services to about 10 KiwiSaver schemes including several caught up in the default makeover such as Simplicity, BNZ and Westpac. Of the four default providers set to exit in December AMP, ANZ and ASB currently handle most admin in-house while Fisher outsources registry to Trustees Executors.
Booster, SuperLife and Kiwi Wealth – three other schemes to take-up or continue default status come December – have also traditionally carried out the majority of member administration internally. However, Kiwi Wealth revealed this May it would update its member registry to accommodate daily unit pricing (from the current weekly service) to meet the new default standards.
As well as transferring member administration data, the default KiwiSaver transition will also involve the move to new balanced funds (from the current conservative strategies) and a transfer of assets between providers.
It is understood the default fund asset transfer is likely play out over a few months introducing a number of tricky – and potentially costly to members – market and transition risks with affected providers still negotiating how to manage the process.