New Zealand: Radical Change Floated For Workplace Super Schemes - And More Tweaks For Kiwisaver

Last Updated: 30 August 2010
Article by Mike Woodbury and Helen Bowie

For KiwiSaver change is, it seems, the only constant. This Brief Counsel comments on the latest round of proposed KiwiSaver changes.

We also report on a bombshell suggestion, tucked within the 200-page Securities Law Review discussion document, to grandfather existing employer provided superannuation schemes.

Lastly we provide a brief potpourri of legislative updates.

Enhancing KiwiSaver governance and reporting

In response to well-publicised concerns about perceived inadequacies in the KiwiSaver reporting and governance regime, the Government plans to fast-track legislation:

  • to bring the required governance structure for a retail KiwiSaver scheme into line with the Unit Trusts Act so that:
    • the manager - or product provider - is legally the issuer of membership interests (so is primarily liable if disclosure documents contain false statements) and owes its management duties direct to scheme members, and
    • the trustee still owns scheme assets but is otherwise responsible solely for supervising the scheme manager
  • to require the trustee (which must be a body corporate) to be licensed by the Securities Commission pursuant to the pending Securities Trustees and Statutory Supervisors legislation, and
  • to assist with healthy competition between schemes (based on the provision of readily accessible and easily comparable information), to require providers:
    "to periodically publish, provide to investors and provide to the regulator, specified information on fees, returns, asset allocation and conflicts of interest in a prescribed manner",

but without unnecessarily duplicating annual and (for default providers) quarterly reporting requirements.


We agree that there are valid policy reasons for retail KiwiSaver schemes to be governed in the same manner as other types of managed funds. We caution though that the "retail" concept must be very carefully defined. Accordingly, we welcome the Cabinet paper's indication that (while there will, of course, be "boundary" disagreements) the concept of a "non-retail" scheme should in principle extend beyond employer-based schemes to include schemes available only to; members of particular unions or professions, or to persons of a particular "calling" through a church scheme.

These schemes invariably operate on a not-for-profit basis and are small, such that restructuring and trustee licensing costs would likely be prohibitive. Unlike retail KiwiSaver schemes, they are also typically trustee-established (making the current framework in our view a more appropriate "fit" conceptually than the unit trusts model).

The Cabinet paper estimates the cost of changing trust deeds to reflect the new governance structure at "up to $50,000 per scheme". While we think that this may be an over-estimate in a good many cases, we nevertheless suggest that consideration be given to enabling the use of "deeming" provisions instead of requiring the changes to be expressed in their entirety in every scheme's trust deed as soon as the law change takes effect. This might, at a minimum, be useful in terms of making it possible then to recast trust deeds in "one hit" should any additional prescriptive requirements emerge from the wider Securities Law Review.

Clause 90 of the Securities Trustees and Statutory Supervisors Bill already contemplates such a mechanism for unit trusts. Successive amendments to the KiwiSaver Act have also implied into trust deeds all the terms necessary to give effect to post-inception law changes such as the matching government contributions and compulsory employer contributions legislation. These have avoided major cost imposts.


As is now well-known, the enhanced reporting proposals will likely require information to be made available quarterly to the regulator, investors and the wider public. The Cabinet paper usefully clarifies though that the Minister does not anticipate providers sending quarterly materials to every investor, and that by implication they need only be made available on websites. Investors are considered likely to be satisfied with annual statements, "supplemented by the ability to access the public quarterly information" and a right to receive further personalised information on request.

These additional reporting requirements are not expressly confined to retail KiwiSaver schemes. The paper contemplates that all KiwiSaver schemes will be required to make quarterly reports available to investors and the regulator. Sensibly however, only retail schemes must also make them available to the public at large.

The paper contemplates that the reporting requirements will be prescribed by regulation within 12 months after the proposed enabling legislation is enacted. They will prescribe such things as fees and returns calculation methodologies and a standard reporting template.

The Government Actuary and the Insurance and Superannuation Unit

The Cabinet paper elaborates on proposals to transfer to the Financial Markets Authority the functions of the Government Actuary (GA) under the KiwiSaver and superannuation schemes legislation. The GA's statutory role will be disestablished, and both his and the Insurance and Superannuation Unit's principal functions will be transferred to the FMA. All legislative references to the GA will be replaced with references to the FMA (for regulatory functions) or to a suitably qualified actuary (for actuarial functions).

Securities Law Review – our take on a bombshell

The Ministry of Economic Development's 200-page Securities Law discussion paper, on which we commented in detail last month, contains something of a bombshell. In the context of an otherwise sensible proposal to exempt workplace-based defined contribution superannuation schemes from the revised governance regime for collective investment schemes (which is being accelerated for retail KiwiSaver schemes), the paper observes that:

"The Ministry's initial view is that an expedient approach may be to grandfather all existing schemes (thus precluding any new investors from joining those schemes while maintaining the status quo for existing investors)..."

The paper acknowledges that defined benefit schemes are different. It notes the recognition in the Review of Financial Products and Providers (RFPP) that the revised governance regime would not be appropriate for those schemes.

The possibility of forced closure to new joiners is presented without supporting reasoning and may be a deliberately extreme scenario put forward for the perfectly valid purpose of eliciting responses. Ours is that we would be disappointed if forced scheme closures ever came to be treated as a credible option.

The RFPP's Collective Investment Schemes (CIS) paper noted the positive design features of employer stand-alone schemes, and acknowledged concerns about costs and forced wind-ups if structural changes were imposed on those schemes. The paper had proposed exempting such schemes from a revised CIS governance regime without requiring forced closure to new joiners.

We think this is the right approach, not least because:

  • defined benefit schemes (almost all of which are employer stand-alone schemes) will necessarily remain governed by the existing legislative framework, and
  • a good many of those schemes are hybrids, with both defined contribution and defined benefit sections comprised within a single trust structure.

We will be assisting with detailed submissions to MED on this issue, explaining (among other things) why in our view there are key respects in which the revised governance arrangements proposed in the Securities Law Review could not practicably be made to work – or would disproportionately complicate scheme administration – should any employer stand-alone scheme seek to comply.

An important consideration is that the trustee (or trustee board) of a stand-alone scheme is the scheme provider so would logically remain as legal issuer if opting into the new regime - but with the compulsory bolt-on (at members' expense) of an external supervisor as another entirely new tier of governance. In a retail scheme, by contrast, the existing provider and its trustee would simply take on different roles.

We will also address the near-consensus view that, for stand-alone non-profit schemes (and here we include industry, profession and church-based schemes), the current legislative structure is working tolerably well. And there is absolutely no substance to assertions that members might somehow be better off by reason of a root-and-branch restructuring paid for (of necessity) from their own retirement savings.

As to the "grandfathering" option, a scheme which has a closed, inexorably diminishing membership complement enters an inevitable death spiral and faces steadily increasing costs on a per member basis.

We think that a more measured solution for improving the governance of existing stand-alone schemes which want to remain open to new members would be to require them to have one independent trustee (or one independent director, if the trustee is a company).

This is increasingly seen as best practice on company boards, and is already reasonably common among schemes themselves. Accompanying this change would be a legislative amendment enabling it to occur (and, for good measure, clarifying that individual trustees can convert to corporate trusteeship if they wish) without either deed amendment or member consent issues arising.

Workplace-based and other not-for-profit schemes contribute billions of dollars to New Zealand's savings base. They exhibit "best-of-breed" features that cannot practicably be replicated elsewhere and – in our best legalese – their sponsors are the good guys. They have gone on volunteering, with no profit motive and often at considerable cost, a facility which KiwiSaver is expressly intended not to replace but to complement.

Our submissions on the Securities Law discussion paper will also cover issues such as:

  • ensuring that in terms of the content requirements for the proposed Register of Securities, employer-based and other schemes which are currently prospectus-exempt retain (at least in substance) their current exemptions in areas such as trust deed summaries, material contracts and disclosure of other material matters, and
  • minimising cost and complexity in terms of requiring amendments to trust deeds that are already satisfactorily prescriptive in a practical sense (where PDS disclosures will suffice, or are objectively preferable in terms of not unduly restricting a scheme's operations).

Taxation Bill - miscellany

Inland Revenue advises that enactment of the long-awaited Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Bill is now expected during August. A few points, meanwhile, which we thought were worth noting.

  • The Supplementary Order Paper (SOP) proposing amendments to allow 6% or 10% KiwiSaver employee contribution rates as added options is an ACT initiative and it remains unclear whether it has National Party support. Providers should bear this in mind when drafting replacement subscription materials.
  • The additional prescriptions relating to minors' enrolments were to have taken retrospective effect on 1 July 2010, so we sought postponement to 1 October and were partly successful - they will now take effect when the Bill is enacted.
  • We made a pro bono submission to Inland Revenue following Budget 2010 seeking the outright repeal of the fund withdrawal tax legislation effective 1 October 2010. The jury is out, but we are optimistic that common sense can prevail (and that the Taxation Bill can be used to repeal the complex grandfathering regime which will otherwise take effect on 1 October).

Next steps

Submissions on the Securities Law Review paper close on 20 August. For further information or assistance in preparing a submission, please contact Chapman Tripp.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mike Woodbury
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions