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New Zealand’s KiwiSaver - regulation memo
New Zealand’s KiwiSaver - regulation memo

New Zealand’s KiwiSaver - regulation memo


KiwiSaver is a voluntary work-based savings initiative to encourage New Zealanders to save adequately for their retirement

About KiwiSaver

Launched in 2007, KiwiSaver is a voluntary, work-based savings initiative to encourage New Zealanders to save adequately for their retirement, in addition to government superannuation. Over 2.8 million New Zealanders have invested approximately USD 30 billion into KiwiSaver (sources: Inland Revenue KiwiSaver membership and Reserve Bank of New Zealand KiwiSaver assets, as at 31 December 2017).

KiwiSaver schemes are registered as managed investment schemes under the Financial Markets Conduct Act 2013, and are established in the form of unit trusts.

Regulatory framework


The Financial Markets Authority (FMA) is responsible for registering and regulating KiwiSaver schemes, and oversees licensed managers and supervisors. The main aspects of the regulatory framework are in place:

The KiwiSaverAct 2006 sets out the major rules around how KiwiSaver schemes operate

  • The Financial Markets Conduct Act 2013 introduced a unified regime of governance and reporting for financial products
  • Schemes must be registered with the FMA
  • A governance framework applies, including prescriptive duties for managers, supervisors and custodians
  • A licensing regime applies for some participants including managers. Managers are responsible for issuing KiwiSaver schemes, managing and administering their assets. They may outsource aspects such as unit pricing and fund accounting to service providers. Supervisors (a role equivalent to a trustee) are licensed to hold scheme assets and may appoint custodians, who may in turn appoint sub-custodians
  • Product disclosure requirements apply, with a mandatory single Product Disclosure Statement (PDS), Key Information Statement (overview of the offer) and quarterly fund updates (with performance data and risk indicators). Fund documents are posted on the Disclose public website.


New Zealand has a “flow through” tax regime for investment schemes, designed to remove tax disadvantages for low to medium income earners saving through managed funds (previously taxed at 33%), making KiwiSaver an attractive savings scheme.

KiwiSaver schemes are usually Portfolio Investment Entities (PIEs). The unit price of a PIE excludes tax. Instead, the PIE calculates and allocates taxable income and tax credits out to each individual investor, based on the investor’s specific tax rate. The PIE is liable for the PIE tax but recovers this from the investors by way of redeeming or issuing units to pay tax/ receive a refund. These tax positions are reported to the Inland Revenue on behalf of investors.

Industry implications

The Financial Advisers Act 2008 (FAA) is being replaced and will impact KiwiSaver distribution. The new law (likely to be live by 2019) will be technology-neutral, meaning it will not distinguish between human advice and robo-advice (digital tools and platforms). This is intended to allow robo-advice, which the regulator sees as a potentially useful for delivering information and advice on KiwiSaver investments. The regulator has even pre-empted this upcoming legal change by introducing a new process from February 2018, whereby providers can be approved to run a robo-advice platform.

In 2017, the FMA updated its guidance on KiwiSaver sales and advice for KiwiSaver providers.

BNP Paribas Securities Services’ view

The general direction of regulatory change is to encourage more New Zealanders to consider investing in KiwiSaver and increase transparency for investors. Our view is that KiwiSaver will continue to be the mainstay of the New Zealand retail funds environment, and that there will be increasing levels of public interest in KiwiSaver as account balances grow.

We expect that legal changes will encourage banks and other providers to develop online software and technology to provide easy-to-use, low-touch access to advice on KiwiSaver investments. Robo-advice platforms therefore look like being a key mechanism for advice and information on KiwiSaver, although it is unlikely that robo-advice will completely replace human intervention.

There is continuing public debate as to how managers of KiwiSaver schemes take into account environmental, social and governance (ESG) factors. Many local fund managers have previously aligned their strategies with the approach taken by New Zealand’s sovereign wealth fund, which has screened out of their portfolio specific investments and sectors. However we expect that managers will start to use third party technology, or to build proprietary systems, to develop their own bespoke ethical investment strategies for KiwiSaver money.

Key dates

2007 - KiwiSaver framework introduced Tax transparent PIE regime introduced

December 2016 - New FMCA regime fully implemented

February 2018 - Introduction of exemption to enable personalised robo-advice

2019 - New Financial Advisers legislation likely to be introduced simplifying the regulatory framework for financial advice and encouraging New Zealanders to seek advice on KiwiSaver

Download the regulatory memo: