Hundreds of thousands of KiwiSaver members in government-appointed default schemes may be unknowingly investing in companies making cluster bombs and anti-personnel mines.
At least five of the nine default KiwiSaver providers invested in these types of companies, despite them being banned by government agencies such as the New Zealand Superannuation Fund and ACC.
The Green Party and Amnesty International say the government must review default providers that have investments in these weapons.
People who sign up to KiwiSaver but do not pick a scheme to enrol in are automatically allocated to one of nine providers hand-picked by the government.
These default providers are ANZ, Westpac, ASB, BNZ, Kiwibank, AMP, Mercer, Grosvenor and Fisher Funds.
More than 500,000 people are enrolled in default schemes, according to figures supplied by Inland Revenue.
An investigation by RNZ has found the default funds run by ANZ, Westpac, ASB, AMP and Grosvenor invested in the anti-personnel mine manufacturer Northrop Grumman and nuclear weapon or base operators Fluor Corp, Honeywell International and Lockheed Martin.
Westpac, ASB, BNZ, Grosvenor and AMP also invested in cluster bomb manufacturers General Dynamics and Textron.
The New Zealand Superannuation Fund and ACC are not allowed to invest in any of these companies because of the government's obligations under international conventions banning the use of these weapons and investment in the companies that make them.
Green Party co-leader James Shaw said investing in cluster munitions was likely to be illegal and he called for the government to review the KiwiSaver default providers that did so.
"The vast majority of New Zealanders I think would just be horrified to learn their hard-earned savings were going to build nuclear warheads or land mines, some of which end up blowing the legs off children in war zones well after the fighting has ceased," he said.
Amnesty International executive director Grant Bayldon agreed a review was needed.
"Most New Zealanders would be extremely concerned if they were unknowingly investing in the sort of weapons we know kill thousands of children every year.
"There's also a moral obligation for the government here to look at the sort of funds it is hand-picking itself and promoting to New Zealanders as default funds," he said.
But Commerce Minister Paul Goldsmith said the Government had no plans to set the rules about what KiwiSaver providers, default or otherwise, could or could not invest in.
Mr Goldsmith said regulations required KiwiSaver providers to disclose the investments they have made and annual statements would also include a full list.
"New Zealanders with KiwiSaver accounts have a choice about which scheme to join and can find out what that scheme invests in."
Mr Key said it was not a big enough issue to review default providers.
He said it was up to each individual to find out where their money was going.
"Some KiwiSaver managers will have a different view on those issues, they'll set their demarcation line in a different place. It just depends who they are."
ASB, Westpac, and Grosvenor invested in cluster bombs, mines, nuclear arms and tobacco companies through the Australian fund manager Vanguard. The Vanguard International Share Index Fund tracks another global index made up of the world's biggest companies.
Investing in global shares this way was considered best practice and the cheapest way to benchmark a fund's performance, Grosvenor chief investment officer David Beattie said.
But he said he did not like the fact that people enrolled in its default KiwiSaver fund were investing in weapons and tobacco companies, and it was trying to change this.
"We are concerned, and we are working with Vanguard at the moment to come up with an alternative replacement fund that specifically excludes those companies," he said.
Grosvenor would give the fund manager about 12 months to come up with a solution, Mr Beattie said.
ASB general manager of wealth Jonathan Beale said most people with a KiwiSaver account were focused on their return on investment.
"I encourage investors to ask questions about where their money is invested, what they're invested in, I think that's a really good start, but I don't think we are there yet.
"People are still wondering 'who's my provider and what fund am I in?' rather than the detail of where [their] fund was invested."
A personal finance columnist and the author of books about KiwiSaver, Mary Holm, said people concerned about what their KiwiSaver was investing in should contact their provider.
"And if you can't get that information easily, that in itself is a sign that you might want to switch providers," she said.
Default funds are typically low-risk conservative funds that hold mostly cash and government or company bonds with only a small proportion allocated to shares in international funds or companies directly.
RNZ asked all nine default KiwiSaver providers whether their default funds invested in tobacco products, cluster munitions, nuclear explosive devices and anti-personnel mines, nuclear power, whale meat, palm oil or kernel production, gambling or pornography.
Kiwibank's Kiwi Wealth KiwiSaver scheme is the only one not to invest in any of those industries.
ANZ default members are automatically put into its conservative fund, which does not invest in any of the industries. However, the bank said it actively encouraged people in that fund to switch to another one within its default scheme, such as its balanced or growth fund, and those did invest in weapons and tobacco industries.
Six default funds invest in tobacco companies that are banned by the Super Fund and ACC.
Two providers, Mercer and Fisher Funds, did not respond to requests for information about their investments.