This week the Government announced new changes to KiwiSaver default providers.  From 1 July 2021 default KiwiSaver providers will be required to shift members’ funds from conservative to balanced investment profiles and exclude investments in fossil fuel and illegal weapons.

The announcement came after a Government review of the settings for default KiwiSaver providers ahead of a procurement process to appoint the new default providers later this year.

So what are the key changes?

1. Changing the investment mandate from ‘conservative’ to a ‘balanced’ fund.
2. Ensuring KiwiSaver fees are simple and transparent, and using the procurement process to put pressure on fees.
3. Obligations on default providers to engage with their members to help them make informed decisions about their retirement savings.
4. Excluding investments in fossil fuels and illegal weapons. The exclusion includes oil conglomerates and any oil exploration businesses but not petrol companies such as NZX-listed Z Energy. While default fund providers have in recent years divested any investments in companies involved in illegal weapons like cluster munitions and anti-personnel landmines, the changes now enshrine that requirement in default fund settings
5. Default providers are required to maintain a responsible investment policy that’s published on their website.
6. Transferring non-active default members of any provider that is not reappointed to one of the appointed default providers (so that these members retain the benefits of being in a default fund).

Whilst some of these changes will come as a surprise to some in the industry, the changes reinforce the Government’s desire to make members better off with greater returns over time and reflects their commitment to addressing climate change. The financial markets including fund managers in New Zealand have in general struggled to recognise not only the risk but also the opportunity that arises from climate change but announcements like this alongside other sustainable finance initiatives show the importance of changing their approach now.

You may also be one of the many KiwiSaver members still sitting in a default provider's conservative fund – that is the fund that contributions went into if you didn’t make a choice before or after your KiwiSaver started – so now is a good opportunity to review your portfolio and see whether you’re making the most out of your retirement nest egg. 

No matter what fund you are in, it’s important to regularly review your investment to make sure it’s the right type for you. If you wish to discuss your KiwiSaver investment or talk about these recent changes with a Trustees Executors Private Wealth Adviser, please contact us on [email protected] or call 0800 768 029.

Disclosure statements are available on request and free of charge.