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Current as of 24/05/17 07:40PM NZST
Money Editor for NZ Herald

Westpac takes another punt at default KiwiSaver

Westpac missed out on the initial tender process in 2006. Photo / Glenn Jeffrey
Westpac missed out on the initial tender process in 2006. Photo / Glenn Jeffrey

Westpac Bank will take a fifth punt at convincing the Government to make it a default KiwiSaver provider despite being turned down four times before.

Information provided to the Herald under the Official Information Act shows the bank, which is already the fourth largest provider for KiwiSaver, has written to the Government twice and its former chief executive made an in-person plea to join the six default providers.

Westpac missed out on the initial tender process in 2006 which saw six companies; OnePath (then called ING), ASB, AMP, AXA, Tower and Mercer selected.

Since KiwiSaver was launched in July 2007 the default providers have scooped up the lion's share of members and funds under management. They manage $8.8 billion out of the $11.8 billion in retirement savings and have 1.27 million members out of the total 1.95 million. Westpac manages $1.4 billion and had 272,738 members at the end of May.

Records show Westpac wrote to the ministers of commerce, finance and revenue in August 2007 and September 2008 asking that the bank be considered again.

In 2007, Treasury and the Ministry of Economic Development told ministers that no further KiwiSaver default providers were needed.

In 2008, the then commerce minister Lianne Dalziel wrote back stating that the Labour Government had agreed to continue to keep the default provider situation "under review" and she had asked for advice from officials to report back as to whether the situation continued to fulfil the Government's KiwiSaver objectives.

Westpac's requests prompted officials to look at the criteria for triggering a review of the default providers as this was not made clear in the initial Act.

In April 2009, former Westpac chief executive George Frazis met Finance Minister Bill English and Commerce Minister Simon Power and also raised the issue of KiwiSaver.

But in a later letter Power wrote to say the default provider regime was fulfilling its role in meeting the Government's aims for KiwiSaver because it was moving new employees into KiwiSaver, the default products were stable, reputable and had handled large volumes of members so far, fee levies had stabilised at low rates and there was a stable market environment.

"Officials consider that opening up the regimes to new default providers would not significantly improve KiwiSaver in a way that would outweigh the costs of opening up the default provider environment."

The letter also said the benefits of any improved competition between the default providers would be small and may be counteracted by the potentially negative effects on competition of increasing the size of the over market share of default providers.

A government report reveals the initial tender process for KiwiSaver cost $780,000.

Power, who has since left politics to join Westpac, told the bank the Government would revisit the issue in two years - in 2011.

It waited until May this year to announce a review.

The Ministry of Economic Development is expected to report back by the end of the year, although the current providers have a contract until July 2014.

A spokeswoman for Westpac said the bank was still interested in becoming a default provider although it was focused on growing its KiwiSaver business organically at the moment.

"We have a compelling offer and that is evident by our success to date, however we are always keen to pick up extra customers which the default mechanism offers."

- NZ Herald

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