Closing the KiwiSaver mortgage diversion facility
2009 legislation closes KiwiSaver mortgage diversion facility (allows members to divert contributions to mortgage repayments) to new participants from 1 Jun 2009.
Sections 229 and 236 of the KiwiSaver Act 2006; regulations 21 and 24 of the KiwiSaver Regulations 2006
The mortgage diversion facility is a feature of KiwiSaver that allows members to divert up to half of their personal contributions to their mortgage repayments. However, mortgage diversion is complex and few KiwiSaver members have opted to use the facility. The facility also imposes unnecessary compliance costs on scheme providers and is not fulfilling its intended policy objectives. Funds diverted through the facility can be accessible, which is contrary to the lock-in feature of KiwiSaver. Diverted contributions are also over and above a member's minimum mortgage repayment obligations. The new minimum contribution rate of 2% has also made the facility less effective for its original purpose.
The KiwiSaver mortgage diversion facility is closed to new participants from 1 June 2009.
Scheme providers and mortgagees are not required to offer mortgage diversion, and may choose to stop offering the facility to existing participants.
New section 236 of the KiwiSaver Act provides protection against any non-compliance with securities-related legislation that may result from the enactment of the Taxation (Budget Tax Measures) Act 2009 (which closed the KiwiSaver mortgage diversion facility to new participants). In particular, this provision provides protection from non-compliance with an enactment related to securities for a limited period from 29 May to 31 July 2009, or if the non-compliance relates to a prospectus or investment statement that was registered or dated before 1 June 2009. This allows time for providers to update prospectuses and investment statements without being at risk of breaching securities regulations.
Closure of the KiwiSaver mortgage diversion facility to new participants is effective from 1 June 2009.