Subpart 2 - Allocating people to KiwiSaver schemes

2006 legislation covering the allocation of people to individual KiwiSaver schemes and setting out the three ways people can become members of a scheme.

Subpart 2 allows the allocation of people to individual KiwiSaver schemes. Section 53 specifies that a person may be a member of only one KiwiSaver scheme at a time, but can have more than one account or investment product of any one scheme. There are three ways that a person can become a member of a KiwiSaver scheme:

People may choose their own KiwiSaver scheme

Section 45 allows a person to choose their own KiwiSaver scheme at any time by contracting directly with the provider of the scheme to become a member. This choice overrides an employer choice of KiwiSaver scheme or an allocation to a default KiwiSaver scheme by the Commissioner.

Employer choice of KiwiSaver scheme

Sections 46 to 49 allow employers to choose a KiwiSaver scheme for their employees. If they do, any employees who start new employment will then become members of that scheme if the employees do not choose their own KiwiSaver scheme.

An employer may choose a KiwiSaver scheme only if all new permanent employees of the employer are eligible to be members of the scheme and the KiwiSaver Act applies to the employees. "Permanent employees" are employees other than those employed in temporary employment (as defined earlier).

The way in which an employer may choose a KiwiSaver scheme is:

  • by agreement with a provider to give access to the scheme for its employees; and
  • by giving notice to the Commissioner of the name, address and tax file number of the employer, the provider and the chosen KiwiSaver scheme.

An employer's choice of KiwiSaver scheme is effective:

  • from the date on which the notice is accepted by the Commissioner, or on any later date specified in the notice; and
  • until the effective date of the earliest of any of the following notices:
    • notice given by the employer to the Commissioner of an alternative choice of KiwiSaver scheme;
    • notice given by the employer to the Commissioner stating that the employer no longer has a chosen KiwiSaver scheme; or
    • notice given by the Commissioner to the employer stating that the employer's choice of KiwiSaver scheme has been revoked by the Commissioner on the grounds that the Commissioner is not satisfied that the scheme is eligible to be the employer's chosen KiwiSaver scheme.

While an employer's choice of KiwiSaver scheme is effective:

  • three months after the Commissioner receives the first contribution for an employee who has been automatically enrolled or who has opted in via their employer, the person is treated, on that date:
    • as having offered to become a member of the employer's chosen KiwiSaver scheme; and
    • as having subscribed for securities in that scheme;
  • the provider of the employer's chosen KiwiSaver scheme must accept that offer and allot those securities;
  • the membership contract of the KiwiSaver scheme is binding on the employee and the provider, and is enforceable as if it were a contract that was freely and voluntarily entered into;
  • the contract may be amended, replaced or terminated, and the allotment of any securities relating to the contract may be voided, in the same way as if the contract were freely and voluntarily entered into; and
  • the Commissioner must, as soon as practicable, give notice to the provider of the scheme the employee's name, address, date of birth (if known to the Commissioner), tax file number, and any other personal information that the Commissioner considers relevant.

If an employer's choice of KiwiSaver scheme ceases or changes, the cessation or change does not affect any person who became a member while the scheme was the employer's chosen KiwiSaver scheme.5

Default KiwiSaver schemes

In cases where the employee does not choose their own KiwiSaver scheme or if their employer does not have a chosen KiwiSaver scheme, sections 50 to 52 provide for the employee to be allocated to a default KiwiSaver scheme by the Commissioner.

When the Commissioner is notified that a person has been automatically enrolled or has opted in via their employer, the Commissioner will provisionally allocate the person to a default KiwiSaver scheme, except where:

  • the person is an employee of an employer whose chosen KiwiSaver scheme is effective;
  • the person has opted out; or
  • the Commissioner has been notified by a provider that the person has become a member of a KiwiSaver scheme.

After notification, the Commissioner must as soon as practicable:

  • provisionally allocate the person (on a sequential basis) to a default investment product of a default KiwiSaver scheme;
  • give notice to the person of that allocation, including the name and address of the scheme provider they have been provisionally allocated to;
  • send the person the investment statement relating to that product in that scheme; and
  • give notice to the person of what will happen if the person does not choose his or her own KiwiSaver scheme.

People who are provisionally allocated have three months from the time the Commissioner receives the first contribution for the person to choose a KiwiSaver scheme if they wish. Otherwise, the person is treated as having offered to become a member of the scheme to which they were provisionally allocated. The Commissioner is required to notify the person that the allocation has been completed as per the provisional allocation and notify the provider of the default KiwiSaver scheme that the person has been allocated to. The Commissioner is required to give the person's name, address, date of birth (if known), tax file number and any other personal information the Commissioner considers relevant, to the provider.

However, if a dispute is underway on the date which would normally be the final allocation date, the final allocation date is the effective date of the notice given by the Commissioner stating that the dispute has been resolved or otherwise terminated.

At the point of final allocation the person becomes a member of the KiwiSaver scheme, the contributions to be paid via the Commissioner must be held on trust by the provider and the provider must allot the relevant securities. The Act deems the membership contract to be as enforceable, and otherwise the same, as if it were a contract freely entered into.

Example one
Frank opts in to KiwiSaver by contracting directly with XYZ Ltd and becomes a member of its scheme. The Commissioner is not required to allocate Frank to a default scheme.

Example two
Lana is automatically enrolled in KiwiSaver. Her employer has chosen ABC Ltd as its chosen KiwiSaver scheme. She does not choose her own scheme and three months after the Commissioner receives the first contribution for Lana, she is treated as having offered to become a member of ABC Ltd scheme. The Commissioner must give notice to ABC Ltd of Lana's details.

Example three
Suna is automatically enrolled in KiwiSaver. Because Suna has not chosen her own scheme and her employer does not have a chosen KiwiSaver scheme, the Commissioner provisionally allocates her to RetireEzy scheme (a default scheme). The Commissioner gives notice to Suna that she has been provisionally allocated to RetireEzy, sends her the relevant investment statement and informs her that if she does not choose her own scheme she will become a member of RetireEzy. The Commissioner does not hear from Suna and three months after receiving the first contribution final allocation occurs to RetireEzy. The Commissioner sends her notice that the allocation has been completed and informs RetireEzy that Suna has become a member of its scheme.

Example four
Arti is automatically enrolled and is provisionally allocated to BI Ltd default scheme by the Commissioner. Two weeks later, Arti contracts with Retire4Life to be a member of its scheme. Arti becomes a member of Retire4Life's scheme.

5 This does not limit an amendment made to the Superannuation Schemes Act 1989 which provides for transfers without consent in certain circumstances (this is discussed further below).