New Zealand: Financial Services Update: KiwiSaver Bill Released

Last Updated: 28 March 2006

Article by Tracey Cross and Alasdair McBeth

Draft legislation for the new KiwiSaver regime was released at the end of last month. The KiwiSaver Bill has important implications for employers. We are currently reviewing the Bill to assess its implications for employers, and will produce a more detailed update setting out our analysis shortly. In the meantime, we highlight a few key features.


All employees over 18 years of age, when starting a new job with an employer that is not an exempt employer, are automatically enrolled in a KiwiSaver scheme. The Bill provides for certain exceptions.

Any person subject to the automatic enrolment provisions, unless they validly opt out, will become liable to automatic deduction of contributions and must become a member of a KiwiSaver scheme.


The window to opt out is two to six weeks following commencement of employment (this is longer than originally proposed).


Every employer of a person who starts a new job must give notice and certain information to the Commissioner of Inland Revenue if the employer is satisfied that the employee is subject to the automatic enrolment rules.

A person who starts a new job with an exempt employer is exempt from the automatic enrolment rules.

An employer who currently has a registered superannuation scheme may apply to be an exempt employer.

To be exempt, the employer’s scheme must satisfy the following:

  • All permanent employees aged 18 and over must be eligible to be a member and be able to transfer their interests in another scheme to that scheme.
  • The trust deed must allow members to transfer withdrawal benefits to another scheme.
  • The minimum employee contribution must be at least 4% of the employee's gross salary.
  • Employer contributions must vest completely within five years of membership.
  • The scheme must be a registered superannuation scheme.

The Commissioner of Inland Revenue must supply to each employer all information packs the employer requires. This information pack contains general information about the KiwiSaver scheme as prescribed in the Bill. The employer must provide this information pack to each of its new employees.

KiwiSaver contributions

Employers must deduct contributions via payroll and pay these to the Inland Revenue. PAYE rules will apply to the deduction of contributions. The minimum contribution is 4% of an employee’s gross salary or wages.

KiwiSaver scheme contributions will be held in an Inland Revenue holding account for a period of at least three months before going to the appropriate provider. Interest will be payable on contributions held.

KiwiSaver scheme members can take a contributions holiday only after the first 12 months of contributions (except in the case of serious financial hardship, in which case they can cease contributions sooner). Applications for contributions holidays must be made to the Commissioner of Inland Revenue.

Voluntary lump sum contributions are also permitted.

The ability to divert contributions towards mortgage repayments is no longer a feature of KiwiSaver.

The Crown must pay a contribution of $1,000 to the first KiwiSaver scheme of which a person is a member. The Crown subsidy is locked-in until the date of entitlement to withdrawal benefits (and cannot be used for first home purchases or serious hardship withdrawals).

A fee contribution of a flat dollar amount per member per annum will be paid by the responsible Department for each KiwiSaver scheme member. It is unlikely that this fee contribution will fully cover the fees of each KiwiSaver scheme.

KiwiSaver schemes

Any scheme that satisfies the following criteria is eligible to be a KiwiSaver scheme:

  • It is established by trust deed and governed by New Zealand law.
  • Its principal purpose is to provide retirement benefits directly or indirectly to natural persons.
  • It is a defined contribution scheme.
  • If a new scheme, it must have at least one independent trustee.
  • At least one trustee is a New Zealand resident or, if a corporate trustee, at least one director is a New Zealand resident.

A KiwiSaver scheme may, but does not need to be, a registered superannuation scheme.

Many of the provisions of the Superannuation Schemes Act 1989 will apply to a KiwiSaver scheme. These provisions are specified in the Bill.

A KiwiSaver scheme will, for the purposes of any other act, be treated as a registered superannuation scheme.

KiwiSaver rules set out in Schedule 1 of the Bill are implied into every trust deed that establishes a KiwiSaver scheme. These rules include that:

  • Trustees may not charge a fee that is unreasonable.
  • The courts have jurisdiction to determine whether a fee is reasonable.
  • The Government Actuary may publish guidelines regarding reasonable fee levels.
  • Contributions are locked in until the later of the age of entitlement to New Zealand Superannuation and the date on which a member has been a member of a KiwiSaver scheme for five years.
  • All withdrawals must be paid as a lump sum.
  • Withdrawals may be made for the purposes of purchasing a first home. This option is only available following three years of membership.
  • Withdrawals may be available in cases of serious financial hardship on application to the trustees of the scheme.
  • Members can transfer from one KiwiSaver scheme to another.

Applications for registration as KiwiSaver schemes are made to the Government Actuary in much the same way as applications to become registered superannuation schemes under the Superannuation Schemes Act 1989. The Government Actuary has 28 days after receiving an application to consider whether the scheme is eligible to be a KiwiSaver scheme.

Existing schemes

Trustees of existing superannuation schemes may do one of the following:

  • Convert the entire scheme to being a KiwiSaver scheme.
  • Establish a new KiwiSaver scheme within the existing scheme.
  • Continue operating independently of KiwiSaver.

Under either of the first two options, the process is by submitting a proposal to the Government Actuary. The proposal must be in the form prescribed in the Bill.

To convert the entire scheme, trustees will need to obtain the consent of all members and contributing employers to the proposal.

To establish a KiwiSaver scheme section within an existing scheme, trustees are only required to notify members and contributing employers of the proposal. A proposal is treated as providing a right for a member to elect to transfer all or part of their interest in the registered superannuation scheme to the KiwiSaver scheme.

Trustees may make proposals on an alternative basis. In other words, if the consent of all members is not obtained to the proposed conversion, trustees can instead opt to set up a new KiwiSaver scheme section.

Choice of KiwiSaver scheme

A member may choose the KiwiSaver scheme that they wish to become a member of by contracting directly with the provider.

If an employee does not choose a KiwiSaver scheme, then an employer may choose the KiwiSaver scheme of which their employees will become members.

If neither the employee or the employer choose a KiwiSaver scheme, then contributions will be paid to one of the default providers as selected by the IRD.

Default providers

The Minister may appoint one or more eligible KiwiSaver providers for a specified term to provide a default KiwiSaver scheme and default investment product.

A default provider must have at least one trustee that is a trustee corporation.

Default providers and default schemes will be selected via a competitive tender process.


The Government Actuary is the main regulatory authority. The Bill provides the Government Actuary with an extensive role and gives him certain powers and authorities.

The Bill provides for regulations to be passed prescribing a number of matters which will be important to KiwiSaver schemes.

An interface with the securities legislation is provided for in the Bill. Importantly, the Bill specifies that employers will not be considered to be ‘promoters’ under the Securities Act 1978 simply by virtue of complying with their responsibilities under the KiwiSaver legislation.


The KiwiSaver Bill has been referred to the Finance and Expenditure Select Committee following its first reading on 2 March 2006. The Committee has called for public submissions on the Bill, with the closing date for submissions being 5pm on Friday 28 April 2006. It is intended that legislation will be enacted in October 2006, with KiwiSaver schemes to start operating from 1 April 2007.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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.

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”

Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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