The Government has opened discussion on a raft of possible changes to the KiwiSaver framework, which could see new members automatically enrolled in more aggressive investment schemes.
Under the current structure new KiwiSaver members are automatically enrolled with one of six providers and allocated into a fund with a conservative investment approach. The theory is that savers will move out of these schemes and into more risk-appropriate ones which better suit them and their individual investment needs.
However, today’s Government’s discussion document said evidence locally and abroad shows that many people adopt a set-and-forget approach and remain with the default scheme for many years.
It said that in Australia – widely seen as a benchmark for pension schemes - almost 80 per cent of the 12 million people with a superannuation account are still with a default provider.
Under changes being discussed, the New Zealand government is looking to change the default allocation from a low fees and capital preservation approach to maximising retirement income.
That means members could be enrolled in funds with either balanced, aggressive, traditional life stages or target date-type investment strategies.
"The Government is committed to ensuring that KiwiSaver is operating at an optimum level," said Commerce Minister Craig Foss. "To do so, the default provider scheme needs to be designed for investors' best interests."
Bruce Kerr, executive director of Workplace Savings NZ, said the changes could be beneficial for savers, but any changes needed to be balanced against the possible costs hikes faced by providers, particularly when new reporting and disclosure rules come into effect next year.
Other topics put up for discussion include the possibility of setting up a specific investment approach to cater for those looking to use KiwiSaver to buy their first home, passive versus active management, and clearing the way to invest in alternative assets.
Submissions close on December 24, and will be published on the Ministry for Business, Innovation and Employment's website.