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Simon Power

9 March, 2010

Work fast-tracked to tighten up KiwiSaver regulation

Minister of Commerce Simon Power has asked officials to fast-track work to ensure the integrity of KiwiSaver is maintained for the 1.3 million people and $4.88 billion of their money invested in the scheme.

"In recent weeks there has been growing concern regarding the regulation of KiwiSaver schemes. Mum and dad investors must have confidence that their money is being well managed.

"The Government indicated last month it supports recommendations from the Capital Market Development Taskforce for additional regulation of managed funds, including KiwiSaver.

"We were intending to make changes in this area as part of the current review of the Securities Act. However, in light of recent developments, I have asked my officials to fast-track this work to ensure investor confidence is maintained."

In particular, I have asked officials to report to me within three to four weeks on whether:

  • The monitoring and reporting regime for default funds should be extended to all KiwiSaver funds. This would require detailed quarterly reporting to an expert monitoring panel and require that one of the trustees of KiwiSaver schemes be a trustee corporation, rather than just an independent trustee, as at present.

  • KiwiSaver funds should be required to regularly report to investors and the regulator on the returns, fees and assets of each fund in a consistent and comparable manner. At present, the only requirement for non-default schemes is for annual returns, and I am advised these are not prepared in a manner which allows for easy comparison between schemes.

  • To increase the ability of the regulator to supervise the trustees of KiwiSaver schemes and hold them accountable for fulfilling their obligations.

  • Further powers for enforcement by regulators are necessary.

"It must be remembered that though KiwiSaver was set up by government, risk is inherent in investment decisions, and those investments are not guaranteed by government.

"These changes are designed to plug gaps in regulation which frankly should have been addressed when KiwiSaver was set up.

"The new regulations will be looked at in context of the creation of a new super regulator, as recommended by the Capital Market Development Taskforce.

"Improving public confidence in financial markets has been a key objective of this Government. We must ensure where possible that mistakes from the finance company collapses are not repeated."

The Government has already made or is in the process of making changes in other areas in the finance sector, including the Reserve Bank taking a role in supervising finance companies, new rules on moratoria, enhanced supervision of trustees, licensing of financial advisors, and the registration of financial service providers.

"We also need to ensure that any regulation is targeted at the real problems and that any resulting costs to businesses and investors are properly justified."

  • Attached is an A3 of the Government's plan for building investor confidence in financial markets.

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