Commerce and Consumer Affairs Minister Andrew Bayly sees potential for KiwiSaver provider consolidation as new investment rules aim to boost local opportunities

Commerce and Consumer Affairs Minister Andrew Bayly acknowledges there’s potential for mergers among KiwiSaver providers following the announcement of new reforms around KiwiSaver investment.

Bayly announced new capital market rules on Friday allowing KiwiSaver providers to invest in private assets and “leverage” the $120 billion currently sitting in KiwiSaver funds. 

He said the majority of KiwiSaver funds are “parked offshore in foreign stock exchanges”, generating little for New Zealand’s economy. Only around 3% of KiwiSaver funds are invested in unlisted assets, compared to around 16% of Australian superannuation funds.

Interest.co.nz asked him after the announcement if NZ had too many KiwiSaver providers as there are currently close to 30 active ones.

Six of those are default providers. People who are enrolled in KiwiSaver and don’t choose a provider for themselves are allocated to one of the default providers by Inland Revenue.

Bayly said it remained to be seen if future KiwiSaver consolidation would happen, but added the KiwiSaver market had already seen some consolidations in recent years.

A recent example was Fisher Funds, the country’s third biggest KiwiSaver provider, buying the wealth management firm and KiwiSaver provider Kiwi Wealth in 2022 for $310 million. 

The Kiwi Wealth sale included over $13 billion in KiwiSaver funds under management. Fisher Funds currently controls 15%, or $17.6 billion, of the KiwiSaver market.

“This market is like any market – there will be natural flight to capital and to quality,” Bayly said.

ANZ is the country’s biggest KiwiSaver provider with a market share of 18.5%, or $21.8 billion, in the latest quarter. ASB has a market share of 15.1%, or $17.8 billion, and is the second largest KiwiSaver provider.

Bayly said more people would start paying attention to KiwiSaver providers as KiwiSaver balances continued to grow.

“I think that's when we'll get to a natural point where people go, wow, I've now got a strategic asset I can realise, actually who is the best provider,” he said.

“Ultimately what we're trying to do is actually get improved returns for KiwiSaver individuals.”

Fisher Funds said many successful private NZ businesses “form the backbone of our economy” and it made sense to look at it from an investment perspective for KiwiSaver.

“We know there is a real interest from our clients in private markets as an option to provide them with enhanced returns,” the firm said.

“With more than 1,000 private companies in New Zealand valued at $20 million to $100 million, there is a rich opportunity to invest in successful businesses, capitalise on their growth and put money back into the local economy.”

The Financial Services Council (FSC) has also welcomed the Government’s announcement to allow KiwiSaver funds to be invested in unlisted assets.

FSC Chief Executive Kirk Hope described the new capital market rules as a good step towards fostering economic growth and “invigorating New Zealand’s capital markets”.

“By enabling KiwiSaver investments in unlisted assets, such as infrastructure projects and innovative New Zealand businesses, we can unlock substantial capital for domestic growth,” he said.