Kiwibank wants your KiwiSaver money

The ranks of the big default KiwiSaver providers are set to swell in the next two years, with Kiwibank confirming it will apply for default status.

The state-owned bank has bought Gareth Morgan Investments, increasing its KiwiSaver clients from 15,000 to about 72,000 and making it the seventh biggest fund. It now plans to take on the big six providers and win a larger slice of the industry.

Kiwibank says it can do a better job than the current default providers - the six schemes that were awarded a government deal to take any new KiwiSavers who did not choose a fund.

So far the system has funnelled about 400,000 people into conservative schemes run by ANZ/OnePath, ASB, Tower, Mercer and AMP/AXA (which count as two funds even though they are now jointly owned). The arrangements are up for review in 2014, opening the door to new players.

Westpac, which was nipping at the heels of the big six before it was overtaken by GMI/Kiwibank, has also been tipped to apply for default status, but the bank has not confirmed this.

BNZ, the only big bank without its own KiwiSaver fund, has yet to enter the fray.

Kiwibank general manager of wealth and managed funds Stuart Bremner said alignment of Gareth Morgan and Kiwibank investment products should be finished by September 30. Kiwibank would step up promotion of its KiwiSaver scheme using the combined strengths of its banking network and GMI's investment management business, he said.

Tower Investments head Sam Stubbs said some smaller providers would disappear if they could not get sufficient scale to turn a profit.

"Any big players that are not in the market will get in," he said. "But 54 schemes is too many for a nation of 4.4 million people."

The rate of new KiwiSaver members signing up voluntarily had slowed to about half of what it was this time last year, suggesting that most people who actively wanted to join were already in, Stubbs said.

Any new default providers that are accepted into the scheme will want to be on board before the Government stages a one-off auto- enrolment of workers in 2014-15, which it has pledged to do if its books return to surplus.

That kind of mass registration would pull an estimated 250,000 new members into the scheme, not including those who choose to opt out again, some of whom would end up in default funds.

The Economic Development Ministry has not yet released the terms of the reference for its review of the default system.

- © Fairfax NZ News

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