BNZ has eye on Tower KiwiSaver operation

Photo / Thinkstock

Law change may have pulled rug from under plans for own scheme

The Bank of New Zealand could look to buy Tower's KiwiSaver business after plans to launch its own scheme appear to have been scuttled by a law change, sources say.

According to nzherald.co.nz blogger David Chaplin, the bank is believed to have been keen to open its own scheme with a mortgage off-set option offering reduced scheme returns in exchange for mortgage benefits.

At present the BNZ uses the AXA KiwiSaver scheme.

But the Government last week introduced an amendment to the KiwiSaver Regulations 2006 Act to block schemes from making any external financial advantages available to their members.

A spokesman for the Ministry of Business, Innovation and Employment said the change had been made because during recent engagements with stakeholders it had become aware that the current law did not ensure that profits generated by assets in KiwiSaver remained in the scheme.

"The fundamental purpose of KiwiSaver is to assist people to save for retirement, and the Government has a clear objective for funds to be locked in until that time."

The spokesman said the change to the regulation would clarify that returns in a KiwiSaver account accrue to the member's account and may not be used for other purposes before retirement.

The BNZ has declined to even confirm that it is launching a scheme.

This week, BNZ head of corporate affairs Mark Watts said he would not comment on speculation in Chaplin's blog but said the BNZ was always looking for ways to benefit its customers across a wide range of products and services.

Yesterday a BNZ spokesman said it would not comment on speculation about a potential acquisition of Tower's KiwiSaver business.

Insurer Tower is under pressure to split up and sell its business because major shareholder Guinness Peat Group, which owns 34 per cent, wants to sell its stake and return the money to its shareholders.

The BNZ is perceived to have missed the boat on KiwiSaver with rival banks ANZ, ASB and Westpac having established strong positions in the market in the five years since the retirement savings scheme was launched.

One source said the BNZ wanted to get size and scale quickly and one way left to do that was to buy Tower's KiwiSaver business.

According to Morningstar, Tower had more than $787 million invested in its KiwiSaver scheme as of June 30.

Morningstar head of research Chris Douglas said BNZ's parent company the National Australia Bank had one of the biggest fund management businesses in Australia through owning MLC but in New Zealand they did not have much prominence in the fund management space.

"Of all the KiwiSaver providers BNZ are the ones that have been the quietest."

A spokesman for the Financial Markets Authority, which oversees the regulation of KiwiSaver, said it could not confirm whether it had received an application from the BNZ to set up a KiwiSaver scheme because the information would be commercially sensitive.