National hopes spreading KiwiSaver funds across multiple providers will drive competition, innovation, and lower fees

A National Government would let New Zealanders invest their KiwiSaver money with multiple providers and rollback the Credit Contracts and Consumer Finance Act (CCCFA).

Andrew Bayly, the party’s commerce spokesperson, said requiring savers to invest their money with just one provider was limiting choices and potential returns. 

“As the sector grows and matures, some KiwiSaver providers are looking to diversify their investments into different classes of assets – such as start-ups and build-to-rent investments.” 

“However, under the current settings, savers who want to access these new investments are forced to shift all their savings to that provider – limiting choice and competition.” 

National would let them split their funds between more than one KiwiSaver provider. It hopes this will fuel competition and innovation, as well as driving down fees. 

“Increasing flexibility and choice for KiwiSavers to allocate their savings across multiple providers will encourage innovation, and higher potential returns over their lifetime,” he said. 

When KiwiSaver was introduced by the then-Finance Minister Michael Cullen, National opposed it.

National Party leader Christopher Luxon said with KiwiSaver providers increasingly diversifying their offering, “we think that savers should be able to get on some of those new offerings without putting all of their savings at risk with a single provider”. 

He said the current settings required KiwiSavers to keep all of their savings with a single provider “limiting and ultimately worsening competition”. 

That meant New Zealanders would be left on the sidelines of new investment opportunities, limiting choices, competition, growth and ultimately “that means smaller savings for Kiwis at retirement”.

InvestNow General Manager Mike Heath said while National had pointed out the risks of investing via a single KiwiSaver scheme, InvestNow and other providers already offered wide fund choice “in a simple administrative wrapper”.

“While we applaud National for identifying a long-known issue with the KiwiSaver system, innovative schemes such as the InvestNow KiwiSaver Scheme have solved the problem without the need for government intervention,” he said. 

He said InvestNow offered KiwiSaver members access to investments from about 15 fund managers from the same administrative system – avoiding the costs and complexity involved in reporting across multiple schemes.

“The National Party emphasis on flexibility and choice in KiwiSaver is on the money. But the proposed policy is more likely to introduce confusion and expense when cost-effective solutions already exist.”

Much of the complexity, expense and risk would fall on the Inland Revenue Department, which channels most contributions to KiwiSaver schemes, Heath said.

He said members of more than one scheme would also lose the benefit of consolidated KiwiSaver reporting where all costs and investment returns can be viewed in context. 

Leighton Roberts, Co-Founder and Co-Chief Executive Officer at online investment platform Sharesies, said it was working on a self-select KiwiSaver offering through its platform.

Roberts said it was great to see further innovation being explored in the KiwiSaver space, and “we agree that there is a huge opportunity to provide Kiwis with more choice and control over how their KiwiSaver is invested”. 

“What National is proposing will benefit some investors, but to drive better outcomes for the significant portion of people who are really concerned about having enough money to retire in comfort, there are other policy changes to consider.”

He said for “a step change, why not do a proper policy review of KiwiSaver that considered access, contributions, tax incentives and compulsion".

Reduce CCCFA, abolish CoFI

The party said it will also roll back “some of the financial red tape” such as in the CCCFA. Bayly said this law was supposed to be targeted at predatory payday lenders, but has ended up stifling consumers' access to debt. National would find other ways to restrict predatory lenders, while reducing the scope of the CCCFA.

Commerce and Consumer Affairs Minister Duncan Webb recently announced a wide review of the controversial CCCFA, after it already underwent substantial tweaks in 2023 to ameliorate some of the issues around borrowing being halted to even low-risk borrowers.

“National will maintain tight restrictions on predatory lenders, but significantly reduce the scope of Labour’s other changes to the CCCFA," Bayly said.

“Someone looking to start a business by extending their mortgage shouldn’t have to tell their bank which brand of cat food they buy or justify their Netflix subscription,” he said. 

“National will also repeal the recent Conduct of Financial Institutions Act, which was meant to manage financial misconduct, but will impose additional burdens on lenders, making credit more expensive and harder to obtain, even for basic services such as overdrafts and mortgages."

The Conduct of Financial Institutions Act (CoFI) was introduced to oversee the conduct of banks and insurers by putting a legal obligation on them to make sure they treat customers fairly.

Finance Minister Grant Robertson said he was "staggered" by the National Party deciding New Zealand doesn't need the Conduct of Financial Institutions legislation.

"This is the legislation that makes sure financial institutions behave well with respect to their consumers. It would be the wild west with National's policy."

CoFI comes into force in March 2025.

Bonded savers 

The party’s previous KiwiSaver policy announcement, which allowed people to use funds to pay rental bonds, was widely criticised by the fund management industry. 

Financial capability said it detracted from the key purpose of the scheme, which was supposed to be about saving for retirement.