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Review of the KiwiSaver Fund Manager Market Dynamics and Allocation of Assets

2 Policy Settings and Interventions

KiwiSaver is a voluntary scheme subject to Government administration and regulatory oversight. The principal governing legislation is the KiwiSaver Act 2006. Other securities laws and regulations also apply to the funds management market in which KiwiSaver is provided. The policy settings and the effect of these interventions on the fund manager market and the asset allocation of members' savings is set out below.

2.1  KiwiSaver policy as a whole

The Government's decision in 2005 to create a workplace-based and state-supported institutionalised saving system with incentives and automatic enrolment features changed the status quo of saving flows in the economy as empirical research by Law, Meehan and Scobie (2011) and evaluation by IRD (2015) has shown and as theory would suggest.

The saving options available to individuals prior to KiwiSaver included, inter alia, housing equity, bank deposits, bonds, debentures, mutual funds, listed debt and equity, life insurance policies and also debt repayments and investment in unlisted equity and unincorporated enterprises (eg, farms). With the introduction of KiwiSaver and the available incentives encouraging membership it was expected that some additional saving would result. A degree of re-directed saving from pre-existing saving options was also expected.

The only empirical quantitative study of the effects of KiwiSaver on national saving by Law, Meehan and Scobie (2011) showed that the scheme has resulted in approximately one-third additional private saving (albeit at considerable cost to the Crown). Limited information exists about the extent of reallocation of saving in the economy. One crude measure is to examine the stock of household savings reflected in aggregate household balance sheets. However, this method is limited in its relevance as it is difficult to control for other factors such relative changes in asset prices, eg, housing and land, general economic factors or exogenous effects.

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