The Government has completed its review of the default provider scheme, and is making changes that will apply to those providers who are selected to offer default schemes in the next term.

They will be required to run balanced default funds rather than conservative.

During the consultation process, some providers had lobbied for a change to a life stages approach, which reduces a person’s allocation to risk over their lifetime.

Faafoi acknowledged the suggestion but said the Government had opted to keep it simple.

He said that was still a significant change and there would be another opportunity to assess whether it was working in seven years’ time.

Providers welcome the move.

“We believe the change from conservative to balanced will be more advantageous for default members, particularly those who don’t engage with KiwiSaver for a long time and miss out on investment gains,” ASB executive general manager of private banking, wealth and insurance, Adam Boyd said.

BNZ’s general manager of wealth, Peter Forster, said it was a “gamechanger”.

Default funds will also be required to drop any investment in fossil fuels.

John Berry, chief executive of Pathfinder and KiwiSaver scheme CareSaver said it would benefit savers and the planet.

“As more funds globally move to exclude fossil fuel companies, oil and gas companies find it harder to raise the capital they need to fund exploration, development and production. It will also protect investors in default funds from the poor returns from oil and coal companies, which have dragged on global investment returns for at least the last five years.”

The Government is not implementing any set rules on fees but will require that any scheme selected as a default provider has a competitive fee structure. It will also put more requirement on default providers to educate, advise and engage with their members.

Katrina Shanks, chief executive of Financial Advie NZ, said New Zealanders should also be given better access to personalised financial advice in their workplaces.

The Government and the sector working together will help ensure the best outcomes for peoples’ financial health, wealth and wellbeing.

“It’s great that more people are making an active decision over their investment, with the Financial Markets Authority reporting 52,000 default fund members made an active decision about their investment last year – up from 28,000 the previous year – and we need to encourage that.

“Financial Advice NZ’s message is that people should look hard at the scheme they’re in – particularly if they’re in a default scheme – and compare its returns and fees with other schemes.

“This is where the value of consulting a professional financial adviser comes in – to help people make decisions that are right for them.”