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KiwiSaver Act 2006: Part 4 - KiwiSaver schemes
Part 4 (sections 115 to 204) establishes the rules for KiwiSaver schemes and their registration. Among other things, KiwiSaver schemes must have a principal purpose of providing retirement benefits, be defined contribution schemes and have an independent trustee.
The Superannuation Schemes Act 1989 and the Securities Act 1978 apply in most instances to KiwiSaver schemes. The KiwiSaver scheme rules (Schedule 1 of the Act) will be implied into the trust deed of every KiwiSaver scheme.
The Financial Transactions Reporting Act requires superannuation scheme providers to verify the identity of new members. This will not be possible for default schemes that will be accepting those who are automatically enrolled as members. The Act therefore provides an exception from this requirement for default schemes, with an associated requirement that schemes take reasonable efforts to verify the member's identity when they become a member.
Registration of KiwiSaver schemes
The Financial Markets Authority is required to register a scheme on the KiwiSaver schemes register if it meets the requirements of the Act. Existing registered superannuation schemes can fully convert to a KiwiSaver scheme and all members of that scheme will become members of the KiwiSaver scheme. For a scheme to fully convert, it must obtain the consent of all members and employer contributors to the scheme. A scheme can, however, fully convert without consent if the terms and conditions of the KiwiSaver scheme are no less favourable than the old scheme.
The Act also enables an existing registered superannuation scheme to establish a KiwiSaver section within that scheme. Members of the existing scheme can then elect to transfer all or part of their existing benefits to the KiwiSaver section.
The Financial Markets Authority has powers to cancel the registration of a KiwiSaver scheme and order its wind-up if it is no longer eligible to be a KiwiSaver scheme, if the scheme has no members or if the Financial Markets Authority considers the scheme is acting in contravention of the Act. The Financial Markets Authority also has powers to direct a trustee to give information to scheme members or to operate the scheme in a specified manner if it believes the scheme is acting in contravention of the Act.
The Financial Markets Authority is required to establish a register of KiwiSaver schemes. This will also show which schemes are default schemes and whether an employer is an exempt employer.
KiwiSaver schemes will be required to provide an annual report to the Financial Markets Authority and must also provide a separate annual return to the Financial Markets Authority on a common date, which will contain unaudited statistical information about the scheme.
Appointment of default providers
One or more KiwiSaver default providers can be appointed by the Minister. To be a default provider, a KiwiSaver scheme must have at least one trustee that is a trustee corporation. The criteria for the appointment are not contained in the Act but the Act provides the Crown with the ability to apply to the High Court to act in respect of the terms of appointment of default providers.
Members' interest in KiwiSaver is not assignable
The Act provides that the interest of a KiwiSaver scheme member cannot be used as security. This means that a member cannot borrow against the amount they have invested in a scheme.