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Investor News Wrap: May 2021

Page last updated: 31 May 2021

News from the month that Kiwi investors should know, including new laws and regulations, fraud and scams, independent reports and offshore developments.

New KiwiSaver default funds announced

A big change to KiwiSaver was announced mid-May, with the Government confirming the new providers who’ll be responsible for ‘default’ funds, ie those for KiwiSaver members who haven’t actively chosen their fund, such as a newly enrolled employees.

From 1 July, six providers will share that responsibility, down from the current nine. Four have retained their default status, while five will lose it, including two of the major banks.

Most affected are over 300,000 KiwiSaver members who are with the five schemes that will no longer be default providers but haven’t made an active choice to be there. Their funds will be moved across to one of the newly approved providers from December. Click here for MBIE’s media release, including details of the new providers.

US regulator looks to ‘freshen up’ rules for investing apps

The head of the US market regulator has signalled a possible refresh of trading rules to address the rise of DIY investing apps and their features that encourage users to trade.

In testimony to lawmakers on 6 May, Securities and Exchange Commission chair Gary Gensler described many apps’ game-like features such as rewards and contests, and behavioural prompts like notifications; all designed to boost customer activity, he said.

Gensler said US laws haven’t kept up with technology, and his agency is preparing to go to public consultation on the matter, and “may find that we need to freshen up our rule set’, in order to better protect consumers. Click here for Gensler’s full written testimony.

Treasury plans new 30-year government bonds

A new 30-year Government Bond (NZGB) is expected to be introduced this year, subject to market conditions. The 2051 nominal NZGB is due to be launched by the end of 2021.

The planned new investment was announced by NZ Debt Management, the Treasury unit that runs the government's borrowing programme, on Budget Day, 20 May.  

The 30-year bonds are part of a plan to issue $30 billion worth of NZGBs in the 2021/22 year, which would take the total issued to $158 billion, equivalent to 45% of GDP.  View the Treasury media statement. 

Learn more about bonds and how they work in the FMA Bond voyage guide.

Thousands of younger KiwiSaver ‘switchers’ still in low growth funds

At least 12,000 younger KiwiSaver members who switched funds during the market volatility caused by COVID-19 last year are still in low growth funds and potentially missing out on higher returns for their retirement or first-home savings, the FMA says.

Data from 11 KiwiSaver providers representing roughly three-quarters of the market shows about 12,700 members aged 26-35 switched from growth to conservative funds in February to April 2020 – and most are still in conservative funds now.

The FMA’s annual KiwiSaver LookSee campaign is urging younger members to check that their current fund’s level of risk, and hence potential returns, aligns with their long-term savings goals. Providers are currently sending out annual statements to members. Access the FMA's KiwiSaver LookSee page.

Reserve Bank urges long-term view on mortgages

The Reserve Bank Governor has urged property buyers to “consider the long term” when taking on debt, with wholesale interest rates forecast to rise from mid-2022.

Adrian Orr delivered the central bank’s latest Monetary Policy Statement on 26 May, which kept the OCR at its record low 0.25% but projected it to rise from next June, to 1.78% by June 2024.

Mr Orr said that projection is why property buyers need to “think about what mortgage rates might look like on average through time [and] be wary around your ability to service a mortgage,” at rates higher than they are now. Click for video of the RBNZ announcement.

Click for the RBNZ's full Monetary Policy Statement for May 2021.