New Zealanders wanting to use their KiwiSaver contributions to reduce the size of their mortgages are being told by some providers they are not offering the scheme.
The KiwiSaver mortgage diversion scheme allows employees with mortgages to transfer half their personal contributions towards paying off their mortgage, but several providers, including three appointed by the Government as default providers, have opted out.
Of the 960,000 members enrolled in KiwiSaver, more than half are enrolled with a default scheme provider: AMP Services (NZ) Ltd, ASB Group Investments Ltd, AXA New Zealand, Mercer (NZ) Ltd and Tower Employee Benefits Ltd.
Three of these, AMP, Mercer and Tower, are not offering mortgage diversion.
An AMP spokeswoman confirmed plans to offer a mortgage diversion scheme were suspended.
Mercer senior account executive Danielle Murdolo said while the company originally expressed interest in offering mortgage diversion, it had decided not to offer the scheme.
Calls to Tower were not returned.
Investor writer Mary Holm said changes due to come into effect on Wednesday largely nullified the effectiveness of the mortgage diversion scheme.
In her latest book, The Complete KiwiSaver, Mrs Holm writes the ability to lower the minimum contribution to 2% from next month means "it now works well only for some highly paid employees".
"Personally, I wouldn't bother with mortgage diversion unless I were young . . . or on a high income."Revenue Minister Peter Dunne said the intent of KiwiSaver's mortgage diversion scheme "was to allow people to save and repay their mortgage at the same time".
The scheme is voluntary.
Mr Dunne said people looking at signing up to KiwiSaver were "strongly advised to read the investment statements" of their providers to see if they offered the service.
"It is voluntary - providers and banks have the choice as to whether they offer it or not," Mr Dunne said.
No changes to the scheme were planned at this point, he said.
ING (NZ) Ltd KiwiSaver head of distribution David Boyle said the company, which has more than 200,000 KiwiSaver clients, decided to offer the offer scheme.
"It is something we said we would offer," Mr Boyle said.
However, most people had chosen not to divert funds, as they "see savings and debt reduction as two different vehicles".
Forsyth Barr savings specialist Gordon Tucker said the company did not offer the scheme but "we are reviewing our policy".
"We expect to make a decision later in the year."
SBS Bank support centre manager Tanya Morton, of Invercargill, said the bank had attracted clients from other providers that had chosen not to offer the scheme.
"It is for the benefit of clients. From our perspective, why would you not offer the service?"
Setting up mortgage diversion involved some "administrative time" and there was no reason for providers not to offer the service if a client had qualified, she said.
