It has completed a review of the default scheme, which started last year, and issued a Cabinet paper in response.
"This [education and advice] requirement should reduce the percentage of fund members who are inappropriately in a conservative fund," the paper said.
It said the new disclosure requirements would also make it easier for KiwiSaver members to make an active choice.
But members in default schemes won’t be put into “life stages” funds, as had been suggested, and the mandate will be kept for default KiwiSaver providers to manage funds conservatively, with 15% to 25% in growth assets.
It had been argued that young savers in particular would benefit from being placed automatically in funds that would change their risk allocations depending on the saver’s age.
"The government believes it should take a risk-averse approach, as the default provider arrangement is making initial investment decisions on behalf of others," English said in a statement. "The aim of default funds is to provide stable returns and build confidence in KiwiSaver while members actively consider the best fund for their individual circumstances."
About a quarter of KiwiSaver members are in default funds with about $3.5 billion under management.
The Government will retender for default schemes with a view to appointing them in April next year. If a current default provider is not reappointed, default members will be asked if they want to stay with the provider. If not, they will be reallocated to a new default provider.
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