Review of KiwiSaver default provider arrangements
closed
Submissions closed:
18 September 2019, 5pm
On 7 August 2019 the Minister of Finance and the Minister of Commerce and Consumer Affairs released a discussion paper that sought feedback on proposed changes to KiwiSaver default provider arrangements. The consultation closed on 18 September 2019.
Submissions are now closed on the KiwiSaver default provider review.
We received 280 submissions on the KiwiSaver default provider review discussion paper.
If you have any questions about the submissions or the review more generally, please email defaultkiwisaver@mbie.govt.nz.
Read the long-form submissions(external link)
Read the quick-form submissions
Key documents
Published: 7 Aug 2019
Discussion document for the KiwiSaver default provider review.
File
PDF, 588KB, 50 pages
Published: 7 Aug 2019
Consumer summary of the KiwiSaver default provider review.
Published: 7 Aug 2019
Template to provide feedback on the review of KiwiSaver default provider arrangements
Options we are considering
Investment mandate of default KiwiSaver funds
Default funds currently have a conservative investment mandate. A change to invest more in growth assets could make a big difference to retirement incomes for people in default funds.
Options we are considering to address this problem:
Some of these options affect first-home buyers. We are interested in your ideas about how first-home buyers in the default funds could be encouraged to choose a fund that best suits their circumstances.
What is your feedback on the investment mandate options for default funds?
Fees
Fees can make a big difference to retirement balances for default members. Fees have a compounding effect over time, especially for people on low balances.
Fees for default members usually include a fixed annual fee and a fee that is a percentage of the KiwiSaver balance.
Options we are considering to address this problem:
Option 1: The government sets a fee for default providers
This option could lead to lower fees, but it may be difficult to determine what the right fee should be.
Option 2: Requiring percentage-based fees to reduce over time as the provider’s funds under management increase
This could lead to lower fees for default members. However, providers might build the requirement into their offerings, and instead offer higher fees to start with.
Option 3: Zero-fees for under-18s or people with low KiwiSaver balances
This option would help under-18s to accumulate savings, although providers might charge higher fees for other members to compensate.
Option 4: Mandate no fixed annual/monthly fees
This could result in higher after-fee returns, especially for those with low contributions. However, providers may compensate by increasing percentage-based fees.
Which fees option do you prefer and why?
Responsible investment
There is evidence that default members would want their investments to be made responsibly. However, imposing responsible investment requirements could be tricky, and could potentially impact on returns for default members. Some people might think that it isn’t the government’s role to ensure responsibly investment practices.
Options we are considering to address this problem:
Option 1: Prohibit default providers from investing in particular sectors or industries or require them to meet certain certification standards
This may lead to providers investing more responsibly, but could also lead to higher fees.
Option 2: Require providers to give members standard information in relation to responsible investment practices
This would allow members to make informed decisions about their preferred KiwiSaver provider by allowing easy comparison between default providers. However, could also lead to higher fees.
Should default funds be used to promote responsible investment? If yes, how should this be done?
Using default funds to develop New Zealand’s capital markets
With $58 billion funds under management, KiwiSaver presents a unique opportunity to boost investment in New Zealand’s capital markets.
Options we are considering to address this problem:
Option 1: Require that parts of the management of KiwiSaver default funds be New-Zealand based
Could increase investment in New Zealand due to greater familiarity with the local market but, could lead to higher fees
Option 2: Require that a small percentage of default funds should be invested in a targeted area, for example, early stage New Zealand businesses.
Could increase investment in the targeted area, and could develop investment expertise in the targeted area. However, could lead to higher fees and reduce provider flexibility to invest in clients’ best interests.
Should default funds be used to develop New Zealand’s capital markets? If yes, how should this be done?
Transferring default members to new default providers
We are considering transferring default members to the newly appointed and reappointed default providers. If you are a default member, this could mean that your default provider changes.
How disruptive would it be for a person if their default provider changed?
Last updated: 20 November 2019