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Who needs to comply
Anyone offering a KiwiSaver scheme must comply with their obligations under the KiwiSaver Act 2006 (the Act) and the Financial Markets Conduct Act 2013 (FMC Act).
Default providers
When an employee starts a new job, if they do not already belong to KiwiSaver and are eligible, they will be automatically enrolled, unless their employer is exempt from KiwiSaver automatic enrolments.
If an employer hasn’t chosen a preferred KiwiSaver provider, then the employee will be allocated to one of the nine default providers - see below. Default providers operate under special-purpose terms and conditions covered in documents known as Instruments of Appointment - see the list below.
Your obligations
All KiwiSaver schemes (other than a handful of restricted-entry schemes) must have:
- a licensed manager who is the issuer for the purposes of the FMC Act; and
- a licensed supervisor whose main function is to supervise the manager.
The core obligations of KiwiSaver providers are set out in the Act and the FMC Act. In summary, these obligations include the need to:
- prepare statistics-based annual returns and lodge these with the FMA
- provide members with annual personalised statements with details of contributions, balances and total fees expressed in dollars (see our methodology notice and our guidance note Fee disclosure by managed funds for how to calculate fees).
- lodge copies of amendments to the trust deed on the Disclose Register
- follow the processes outlined in the FMC Act when a scheme is wound-up
- provide quarterly and annual fund updates
Monitoring and surveillance
The FMA monitors whether KiwiSaver schemes are complying with their obligations. We do this in conjunction with supervisors of KiwiSaver schemes, who take on the main front-line supervisory and compliance monitoring role.
See our KiwiSaver reports for more information about monitoring.
FMA's focus areas
Investments - Managers must exercise care, diligence and skill with investment of scheme assets, and act in accordance with the statement of investment policy and objectives (SIPO). Our guidance note to KiwiSaver Supervisors provides more detail.
Unit Pricing - Unit pricing errors can have adverse implications for investors. We will consider how KiwiSaver scheme supervisors monitor managers' pricing activities.
Disclosure - We will review KiwiSaver scheme offer documents in conjunction with the SIPOs to test whether investment strategies are appropriately disclosed, and disclosure documents are understandable to investors.
KiwiSaver scheme supervisors - Supervisors are crucial to the effective operation of KiwiSaver schemes. We include a focus on KiwiSaver as part of our ongoing monitoring of supervisors. We will also work to clarify our expectations of supervisors for KiwiSaver schemes.
Advice – See our KiwiSaver Sales and Advice guidance. We expect distributors to monitor advice practices and avoid inappropriate customer incentives. We will issue information to consumers on what they should expect and will take action in the event of mis-selling.
Questions and answers
Q: What are the 'unreasonable fees' restrictions in the KiwiSaver legislation?
A: Any KiwiSaver scheme supervisor, manager, promoter or other person cannot charge an 'unreasonable' fee. Regulations 10 to 12 of the KiwiSaver Regulations 2006 set out the process requirements and relevant criteria for the FMA when considering whether a KiwiSaver scheme complies with the requirement that fees not be unreasonable, and there are KiwiSaver guidelines which provide additional information.
Scheme fees must be disclosed in PDS's and all fees will be assessed in line with the legislation when a provider applies to register a scheme. You must notify the FMA of all fee increases.
Fees charged by advisers for advice about particular KiwiSaver schemes might in some cases (e.g. where the adviser belongs to a scheme's sales force) be 'services relating to the provision of KiwiSaver schemes'. Therefore they will be subject to the unreasonable fees restrictions. It is not appropriate in any circumstances for advice fees to be deducted from members' KiwiSaver accounts.
Q: Do employers have to inform the FMA when they select a preferred provider?
Q: How should payments of insurance premiums be treated?
A: Section 68(2) of the Act provides that payments for 'other things' such as life insurance premiums do not count as contributions under the Act, or towards a contribution rate, and cannot be paid via Inland Revenue. This means, for example, where such payments are made by an employed member they must be additional to the employee's chosen 3%, 4% or 8%.
Q: Can scheme providers substitute their own wording in statements requited in their annual reports?
A: In some cases providers of KiwiSaver schemes have substituted their own wording in schemes' annual reports for the statements required under the FMC Regulations. As a result, the meaning of some statements and certifications has changed, requiring the regulator to seek clarification and replacement statements in some situations.
For clarity, supervisors should ensure that KiwiSaver scheme use the wording required for statements as specified in the FMC Regulations.
Q: What are scheme providers' obligations relating to unpaid and short-paid employer contributions to KiwiSaver schemes?
A: Providers should reconcile contribution amounts that they receive against amounts that the providers expected to receive from each employer. Where the two amounts do not match up, providers should follow up this discrepancy and take appropriate action to address it.
Depending on the circumstances of the scheme, providers should be aware of any contribution shortfalls, and the appropriate action to take with any discrepancies.
Q: Is there a requirement for a signed application form?
A: A person can transfer between KiwiSaver schemes without having to physically sign an application form to join the new scheme. The contract between the prospective member and the new scheme can be made electronically by meeting the requirements for a valid contract and those applicable to electronic contracts.
Q: When may the FMA approve transfers without the consent of members?
A: Members generally cannot be transferred between KiwiSaver schemes without their prior written consents - see section 179 of the FMC Act. However, section 181 of the FMC Act enables a KiwiSaver scheme provider to apply to FMA for approval to a proposed bulk transfer between two KiwiSaver schemes without members' written consents.
The FMA must be satisfied that the terms and conditions of the scheme are no less favouarble than those of the of the old scheme, and that the transfer is otherwise reasonable in all the circumstances, as well as certain other conditions being met. We have not issued guidelines as we will consider any applications on a case-by-case basis. However, in relation to the 'no less favourable' requirement, providers should note the guidance set out in APRA Superannuation Circular No. I.C.4.
Members must be notified that the applicant has applied for the FMA’s consent to transfer the person without the person’s written consent and that they have the right to make a submission to the FMA about the transfer proposal. We would expect members:
- to have at least 28 days to make that submission; and
- be given sufficient comparative information, including fees, investment options and member services, to enable them to make their own value judgements.
Q: What guidance does the FMA have on the tests used to determine what is ‘no less favourable’ and ‘otherwise reasonable in the circumstances’, when deciding whether to approve a transfer without requiring member consents?
A: Transfer approval applications are considered on a case-by-case basis and FMA must consider any member submissions received. Under section 181 of the FMC Act the FMA may approve a transfer if it considers the terms and conditions of the new scheme are less favourable and the transfer is otherwise reasonable in all the circumstances. When the FMA considers the terms and conditions are no less favourable it is required to consider all aspects, including how areas such as fees, benefit entitlements and investment allocations compare.
Q: What documentation does the FMA require from the scheme provider to enable transfers without the consent of members under section 181?
A: Under section 181 of the FMC Act the FMA may consent to a transfer without the consent of scheme participants if the applicant has given notice to every proposed transferee that the applicant has applied for the FMA’s consent to transfer the person without their written consent, and that the person may make submissions to the FMA about the transfer.
The scheme provider should send the following information to the FMA before they are finalised and sent to members:
- a draft of the formal application letter under section 181; and
- draft copies of the transfer notice communications for members.
As noted above, the FMA expects proposed transferees to be provided with sufficient comparative information; including fees, investment options and member services, to enable them to make their own value judgements about the transfer, and to assist in any submission they may make to the FMA about the proposed transfer.
Please send these to compliance@fma.govt.nz with the subject line ‘KiwiSaver transfer application form section 181 Financial Markets Conduct Act 2013’
Q: Where can I find statistics on KiwiSaver schemes?
Breaches and Offences
Fair Dealing provisions under Part 2 of the FMC Act apply, including prohibiting misleading or deceptive conduct and false or misleading representations. It also remains an offence to supply false or misleading information under section 160 of the KiwiSaver Act.
There are a number of other offences set out in the FMC Act, including the contravention of certain Part 4 governance provisions, as set out in section 228. A contravention of these provisions may give rise to civil liability. Part 8 of the FMC Act sets out further civil liability acts, infringement offences, as well as criminal liability offences.
The FMA is able to take action under the FMC Act, including making direction orders, issuing stop orders and infringement notices, and bringing criminal proceedings.
See the FMA's enforcement policy.
Registered KiwiSaver schemes
To find out information about a KiwiSaver Scheme please check the Disclose Register. You can also find a list of KiwiSaver providers on the Inland Revenue website.
