On Friday 28 February 2020, Jorge, a retiree, contacted his KiwiSaver provider and said he wanted to withdraw all his KiwiSaver funds because he saw the share market falling. The customer service representative he spoke to advised Jorge that because KiwiSaver is a long-term investment, he should not necessarily withdraw in times of market volatility. That is, Jorge may like to consider whether to wait to withdraw his funds until the market had stabilised. Jorge confirmed, however, that he wanted to withdraw his full balance.
The customer service representative advised Jorge that a full withdrawal of funds and payment could be made that day if Jorge’s withdrawal paperwork was received by 1pm. Jorge sent through the necessary paperwork before 1pm. Just before 1pm, the customer service representative emailed Jorge back advising him his current balance was $1,026,000 and asked whether he would like to proceed and withdraw $1,025,000 (leaving in $1,000). Jorge confirmed that he wanted to proceed and withdraw $1,025,000.
The KiwiSaver provider then decided that because it was a large payment, it could not be made that day. Instead, payment would be made on Monday 2 March, using the unit price for 28 February. The customer service representative contacted Jorge to advise him of this, that the markets would fluctuate, and that the balance shown on the online account was based on the last available unit price, which could be up to two days old.
On the Monday, Jorge received $1,007,000 into his bank account, $18,000 less than he was expecting. It transpired that the balance advised to Jorge on 28 February ($1,026,000) was based on the unit price two days earlier (on 26 February). The amount Jorge received ($1,007,000) was based on the actual unit price for 28 February.
Jorge complained to FSCL. Jorge wanted the provider to pay him $18,000 to resolve his complaint.
The crux of Jorge’s complaint was that he considered he was misled about the balance of his account. Jorge said that if he had known his balance was $1,007,000 on 28 February, he would not have rushed around collating all the withdrawal paperwork by 1pm that day. Jorge said he was shocked to find he had been paid $18,000 less than he expected.
We considered that the email the KiwiSaver provider sent Jorge just before 1pm on 28 February misrepresented the account balance, and the amount he would be receiving. The KiwiSaver provider should have told Jorge that:
- it did not yet know the unit price that would be applied to his withdrawal application
- the last unit price it had was for 26 February and that, based on that price, his account balance on 26 February was $1,026,000
- the price may have moved between 26 and 28 February, and that the 26 February account balance was only indicative of what he might receive on 28 February.
However, despite being misled, we found that Jorge had not actually suffered any financial loss flowing from the misrepresentation. There was no evidence that Jorge had relied on the incorrect balance information, altered his position, and suffered a financial loss as a result. For example, Jorge had not been using his KiwiSaver funds to purchase a house, only to find he was $18,000 short on settlement, and then incurred penalty interest for a delayed settlement.
However, we agreed with Jorge that it would have been a shock to receive $18,000 less than he expected. We recommended that the KiwiSaver provider pay Jorge $250 for the inconvenience it caused by not providing him accurate information about his account balance.
Both parties accepted our findings, and Jorge accepted $250 in full and final settlement of his complaint.
Insights for participants
During times of market volatility, such as during the Covid-19 pandemic, investment balances can fluctuate drastically within a few days. More than ever, it is important that providers are clear and accurate in their communications with consumers about their account balances, how and when the balances are calculated, and how large price movements can occur each day in times of market volatility.