Can my KiwiSaver go Bankrupt?

  • Fabook Messenger Sharing Link

There is a lot of talk about all the potential benefits of KiwiSaver, but what about the other side of the story. What if it all goes wrong and your provider goes bankrupt? 

Well, the good news is that your money is still safe! 

People can sometimes be scared of investing because of the misconception that if your provider goes bankrupt then your KiwiSaver investments might be used to cover it. But that is not true at all. This is because your KiwiSaver investment is actually stored in a trust. 

What is a KiwiSaver trust you may ask?

Before we understand what a KiwiSaver trust is, we need to understand these three roles:

  • The Settlor - Has original ownership of the asset. This is you in the situation. 
  • The Trustee - The trustee is a separate legal entity who gain legal ownership of your asset. While they are appointed by KiwiSaver providers, the trustee is independent. They also ensure that your KiwiSaver provider complies with all legal obligations.
  • The Beneficiary - They are entitled to the benefits/use of the asset. This is also you.

A trust is the legal relationship between the settlor, a trustee and a beneficiary. KiwiSaver trusts are not entirely dissimilar to property trusts. You (the settlor) transfer the legal title of your KiwiSaver investment to a trustee who holds the legal title of your asset on your behalf. The trustee owns and manages the asset for the benefit of the beneficiary. A Trustee cannot be a Beneficiary as it causes a conflict of interest. 

What this means is that KiwiSaver is safe because trust assets are held separately from the provider. The purpose of this is to protect the asset (your KiwiSaver investment) for the sole use of the beneficiary (which is essentially you in the future). 

So where does the KiwiSaver provider fit into all this?

In legal terms, nowhere. 

The providers do not legally own your KiwiSaver investments so your KiwiSaver investment cannot be used to cover their debt in the event of bankruptcy. The providers simply manage your money, they do not own your assets. 

The asset is legally owned by the trustee so in the unlikely event of a KiwiSaver provider going bankrupt, your trustee would simply appoint a new KiwiSaver fund manager of your choosing. 

Kind of got it?

This can all be rather confusing, but it is important to understand as it gives you confidence in your KiwiSaver investment and provider. It will help you stick more closely to your retirement savings plan which will get you to your goals faster. 

While your KiwiSaver is exposed to many external factors, ultimately you have the largest influence over your KiwiSaver. Check out this article to better understand how you can improve your retirement.

  • Fabook Messenger Sharing Link
Take the stress out of KiwiSaver. The first step is to complete our KiwiSaver HealthCheck.

You may also like

How to Invest in KiwiSaver if You are Planning to Buy a House

So you’ve been saving hard to buy a house. You’ve controlled your spending, put in more time at work, and invested aggressively..

Should I Contribute More to KiwiSaver or Pay Down my Mortgage?

Adulting is hard, there are so many things to balance! One of them is our finances, specifically the question - if I have extra..

How KiwiSaver Can Help You Buy Your First Home

Buying your first home is exciting - but it can also be expensive and stressful. Here are some ways in which KiwiSaver and the..

KiwiSaver members could miss out on $3.5 billion in retirement

Amidst the economic turmoil caused by the coronavirus pandemic, falling KiwiSaver balances may be a nerve-wracking sight for..

News: Reshuffle in Juno KiwiSaver Scheme operations

Juno KiwiSaver Scheme, a KiwiSaver fund provider owned by Pie Funds, has recently slimmed down its staff and operations. 


How is my KiwiSaver account taxed?

Tax is not the most riveting subject in the world, nor is something we like paying, but having the right information when it..