KiwiSaver members should have the ability to put their money with more than one provider, an NZX and FMA-sponsored report on New Zealand’s capital markets said.
The report, which made a raft of recommendations aimed at achieving broader participation by New Zealanders, said KiwiSaver would become the predominant pool of retirement savings over time.
NZX and the Financial Markets Authority (FMA) initiated an industry-led review of New Zealand’s capital markets early this year.
The report – Capital Markets 2029 – is designed to deliver a 10-year vision and growth agenda for the sector.
“The changes we have recommended to KiwiSaver are largely focused on this objective,” the report said.
“We believe our KiwiSaver recommendations will retain direct personal participation in the capital markets, open access to alternative investments and, more importantly, act as a catalyst for greater innovation from existing and new KiwiSaver providers,” it said.
“Incentives for KiwiSaver entrants to make an active choice on the type of KiwiSaver fund to join and our recommendations on financial literacy should promote better long-term outcomes for New Zealand,” it said.
For users of capital, the report envisioned a greater availability of capital across the spectrum of investment stages.
This would provide companies choice within a “New Zealand-centric” system to meet their capital needs.
The NZX and the FMA engaged with a wide range of capital market participants to find out what changes were needed.
The report said the current KiwiSaver regime encouraged saving, but fostered investment predominantly in lower-growth assets and has limited exposure to private markets.
It also noted that a large number of New Zealanders were not actively participating in KiwiSaver.
It highlighted a two-tier public market that was working well for the larger companies – who were able to raise funds from the market – but was less liquid and effective for smaller companies.
It noted the public market was struggling to attract new listings.
“Private markets that are working well and growing, but not necessarily serving the full range of New Zealand investors, nor the full range of investment stages,” it said.
The report recommended:
• Raising the level of individual participation and engagement in capital markets.
• Offering more choice of investment for individuals, both within KiwiSaver and more generally.
• Growing the base of companies that can access the public capital market, reduce the barriers to listing where possible and increase motivation for public companies to remain listed.
• Growing the private capital “ecosystem” in New Zealand.
• Using the capital markets to fund infrastructure in New Zealand.
Capital Markets 2029 chair Martin Stearne said some of the changes recommended to KiwiSaver, for example, were focused on stimulating more New Zealanders to become engaged investors.
“Many of the recommendations are also designed to create larger pools of capital for funding New Zealand enterprises, including infrastructure, via public or private markets.
“We believe this report is a mandate from the industry for the recommendations which are aimed at seeing more capital flowing more efficiently to New Zealand enterprises, as well as providing more investment opportunities for a greater number of Kiwi investors.”
Stearne said that next steps will include formal responses from NZX and FMA, as well as from other parties to whom recommendations have been made.
The NZX has offered to report on the progress made by all parties in implementing the recommendations, with a first assessment in 18 months.
The report was produced by EY.
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