FSC questions fossil fuels decision

The Financial Services Council has sounded the alarm over the “politicisation” of KiwiSaver.

Monday, March 2nd 2020, 9:35PM

It was revealed at the weekend that the Government will require future default KiwiSaver providers to avoid any fossil fuel investments.

They will also be required to place default members in balanced, not conservative funds.

FSC chief executive Richard Klipin said the risk allocation change was welcome, but he was not convinced about the change to providers’ investment mandate.

“Research commissioned by the FSC in 2017 found that New Zealanders want certainty with KiwiSaver, want it to not be politicised, and want it to be stable and focused.

“There is a risk that the fossil fuel decision may lead to a greater politicisation of KiwiSaver and the potential for reduced investor confidence which would not be helpful for anyone.”

Klipin said any Government limitations on KiwiSaver investments must meet the test of being in the best interests of savers.

“That means being clear about how fossil fuel investment restrictions are defined and properly assessing the impact they will have on the financial performance of Kiwis’ retirement savings.

“Without these questions being answered there is a real probability that this move will be seen as a political call, rather than a rigorous well-thought-out investment decision.”

Klipin urged the Government to prioritise work on how to manage the process if an existing KiwiSaver default provider is not reappointed, and they lose their default clients.

“This would likely involve transferring tens of thousands of KiwiSaver accounts at once and if not carefully managed could be a cumbersome process. It is vital that officials have modelled it carefully and planned accordingly.

“Trust and confidence in KiwiSaver are essential. We therefore welcome the changes in this announcement that help build stability and confidence in the Scheme. We urge though the Government to tread carefully on those that risk further politicisation of KiwiSaver and dragging it into the political arena.”

Tags: FSC KiwiSaver