Inside Money: BNZ mortgage-linked KiwiSaver plan foiled

9:30 AM Monday Oct 1, 2012

It is understood BNZ planned to create a mortgage offset KiwiSaver option, allowing earnings to be released early. Photo /

The Government snuck a new KiwiSaver regulation into existence last week in a move understood to be aimed at foiling an innovative marketing strategy of the yet-to-be formalised BNZ KiwiSaver scheme.

KiwiSaver Amendment Regulations (No 2) 2012 prohibits providers from linking member accounts with any financial inducements outside the scheme.

"The provision imposes a duty on the trustees or the manager of the KiwiSaver scheme (as the case may be) to ensure that the value attributable to a member's KiwiSaver accumulation is credited to the member's KiwiSaver account and not received as an external financial advantage," the regulation, due to take effect on November 1 this year, says.

Industry sources say the new rule was crafted to plug a potential leak in the system that was revealed by a BNZ proposal to link KiwiSaver accounts with mortgage payments.

If the alleged BNZ plan had been allowed through (and prior to the latest regulation it would have been legal), KiwiSaver earnings may have been released early via an offset relationship with external bank financial products - a clear breach of KiwiSaver's purpose to create long-term savings.

While no details of the BNZ proposals have been released, it is understood the bank planned to create a mortgage offset KiwiSaver option - offering reduced scheme returns in exchange for mortgage benefits.

Wording in the latest regulation seems to confirm this was the government's concern: "The regulations will prevent arrangements such as nil-return investment policies for KiwiSaver schemes that are linked to external financial advantages, such as mortgage off-set."

BNZ has lagged other major banks in the KiwiSaver market, promoting rival schemes Axa and AMP through its network. However, as I reported in March, BNZ has been working on its own KiwiSaver scheme, selecting Russell Investments as its fund manager.

It is understood wrangles over the mortgage offset plan have delayed the launch of the BNZ scheme.

By David Chaplin

Micks () | 10:51AM Tuesday, 02 Oct 2012

BNZ has been asleep at the wheel in regard to Kiwisaver and has let the other banks steal a march on them. They are obviously now getting desperate to try and come up with something different to try and attract people away from their existing provider.

Grizzle (New Zealand) | 10:51AM Tuesday, 02 Oct 2012

Why did they block this scheme? This would have been fantastic! Instead, we are forced to have management companies charge huge fees on our retirement savings while they gamble whats left on stock markets. If they making losses, which is more often then not, we are powerless to do anything.

I have 30k in an Australian super fund. I've watched it dimish through fees since I've stopped paying into it following a move back to NZ. I then foolishly joined Kiwi saver which has been equally as bad.

Such a shame BNZ didn't get this right. If they had, I would have moved my mortgage to BNZ to undertake this.

Also it would have been a huge step forward in reducing the countries private debt to GDP ratio which is such a worry in NZ at the moment.

C'mon BNZ, fight back!

Nick (Mt Roskill) | 09:54AM Wednesday, 03 Oct 2012

I agree if this was linked to offset mortage and even with no returns it would have been much better as it will ensure around 6% minimum returns while it there is no guarantee with existing arrangement.

Biggest trouble with Kiwisaver is that manager gets assured returns and investor does not. Consider a scenario where you are retiring in a year like 2007/8 when recession hit hard.

All funds will be in deep dive and all you are left with is to hold forever (its 2008-2012 and we are still not out) or take hit and salvage what you can.