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NZ First proposes state-guaranteed KiwiFund option for KiwiSaver to lower fees; Green Party supports idea; Labour open to it

Posted in KiwiSaver Updated

By Bernard Hickey

New Zealand First has proposed the creation of a government-guaranted KiwiFund option for KiwiSavers that it said would lower fees and increase investment in New Zealand assets.

Leader Winston Peters unveiled the policy in a speech on Sunday at the Party's annual conference in Christchurch and later told reporters it would be one of NZ First's 'bottom lines' in any coalition negotiations after the November 2014 election. NZ First is polling at around the 5% threshold and is widely expected to be re-elected.

The Green Party said it supported the proposal and Labour said it was open to the idea, although said it thought KiwiSaver was not broken. Prime Minister John Key criticised the idea as a monopolistic move back to a Soviet era and doubted it would be a bottom line for Peters.

Peters said KiwiFund would be government guaranteed and would produce higher returns with lower fees than the privately-managed KiwiSaver funds.

KiwiSaver fund managers had received NZ$325 million in fees in the scheme's first five years and an un-named independent source had forecast they would receive a further NZ$22 billion over the next 30 years, he said.

"They plan legalised plunder on a massive scale," Peters said.

"People saving through KiwiFund will be buying back New Zealand. KiwiFund will invest in buying back farmland, state assets and critical infrastructure. Funding will also be provided to support smart local companies to develop new products and create jobs," Peters said.

KiwiFund would be put on the "same footing" as the New Zealand Super Fund, he said.

Peters later told reporters KiwiFund would be an option for those already in KiwiSaver funds to move to, but appeared not to suggest existing savers would be forced to choose KiwiFund. He has yet to detail whether it would be a default fund or the only default fund.

'Speaking in riddles'

Prime Minister John Key told TVNZ's Breakfast programme the proposal would create a monopoly and "generally monopolies are not a great thing."

"I know that these guys are on this track to nationalise electricity, nationalise building, nationalise management of funds, they'll be nationalising supermarkets and petrol stations and everything else soon and that worked really well for the Soviet Union when they were doing that," Key said.

He rejected the suggestion he would have to negotiate over KiwiFund with Peters after the November 2014 election.

"Winston Peters speaks in riddles. He has for his entire career as far as I can see. He'll find some way of saying this is introduced or looked at, whatever. Mark my words. It won't be a bottom line," Key said.

Green supports it and Labour says it's open to it

The Green Party said the KiwiFund proposal was a "move in the right direction, providing that it is about providing competition to the existing private KiwiSaver funds and not proposing to nationalise them."

Green Co-Leader Russel Norman said there was common ground with the Green proposal for a public fund that was an optional default fund.

“Under our proposal, the investment function – the back-end – would be managed by the NZ$23 billion New Zealand Superannuation Fund while Kiwibank or the Inland Revenue Department can provide the front-end management of individual KiwiSaver accounts," Norman said.

“We are going to do for superannuation, what Kiwibank has done for banking,” he said.

Labour Leader David Cunliffe was quoted as saying on Radio NZ Labour was open to considering it, but that KiwiSaver was not broken.

"It's not our starting position. We don't think that in general the KiwiSaver model is broke and so it doesn't need this fix," Cunliffe said.

"We share with Mr Peters a concern that in some cases, in particularly some conservatively managed funds, the level of fees seems disproportionate to the returns on those funds. We'd be very happy to have a very close look at that aspect of it."

'Thin gravy'

The Financial Services Council (FSC), which represents fund managers, said Peters' comments about a fees 'gravy train' were "way off the mark"

“Current fees for KiwiSaver have been certified as not unreasonable by the Government Actuary and in future by the FMA,” FSC CEO, Peter Neilson said.

"Fees are lower than in Australia and are likely to decrease as account balances and Funds Under Management grow,” Neilson said.

Neilson said recent low prices paid for KiwiSaver funds management companies indicated that this was not yet a lucrative area of business because of a high account volumes and low balances.

“The number one issue affecting KiwiSavers in getting to a comfortable retirement is the harsh tax regime which favours property investment over savings, followed by the type of funds portfolio chosen. Fees are a very distant third.”

(Updated with FSC comment)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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50 Comments

Updated with comments from

Updated with comments from FSC about the gravy being thin
cheers
Bernard

This idea is wrong on so many

This idea is wrong on so many levels.

  • Endless tinkering with KiwiSaver reduces confidence
  • KiwiSaver schemes are already tightly regulated by FMA
  • Nothing to suggest that the Super Fund is the best fund manager in town, and would therefore produce the best after-fee result
  • Agree with FSC comments - KiwiSaver schemes aren't actually that profitable. Just look at all the schemes that have closed or merged in the last year
  • Who really wants politicians to look after their retirement savings?

"Who really wants politicians

"Who really wants politicians to look after their retirement savings"
Totally and utterly agree, especially when they say,
"and increase investment in New Zealand assets."
That will be council, Govn and other similar debt, or worse We can already see in Spain just how bankrupt this policy now is...so can kicking, using present savers money, they will never see it again.
If its "guaranteed, well the PAYE's cop it, more can kicking, either the savers themselves find they are guaratnteeing tehor own money, or future workers will find they are working to cover these promises.
Pollies will "direct" such a fund to "invest" in pet job creation schemes that would not stand up to commercial scrutiny.
I mean I have always considered Whinee an utter ***** and champion of the pork barrel to boot, here he goes proving it again in spades.
***shakes head***
regards
 

Agree with FSC comments -

Agree with FSC comments - KiwiSaver schemes aren't actually that profitable. Just look at all the schemes that have closed or merged in the last year
 
Tell me without hysterically laughing out loud that GMI's sale to the NZ Post entity was not profitable for the vendors/owners. Read more
 
Then tell me without a smirk that Kiwibank's KiwiSaver fee structures required to cover just the goodwill setllement part of the purchase price will not have to border on extortion.

Well that's Kiwibank's

Well that's Kiwibank's problem then. Consumers aren't stupid, they won't pay high fees if they can avoid them.

Well that's Kiwibank's

Well that's Kiwibank's problem then.
 
Yep, which is owned by NZ Post, which in turn is owned by the Government  - so just like Solid Energy, which under pre-existing SOE law was meant to be beyond a government rescue, we will no doubt have to endure the dubious luxury of making this outfit whole again, sometime in the future.

How about a gaurantee for

How about a gaurantee for bank deposits?

why?  

why?
 

Because 32% of loans funded

Because 32% of loans funded from foreign wholesale sources together with ~10-15% of loan assets associated with covered bond protection are exempt from OBR pre-positioning in the event a bank is declared insolvent - their loans are collaterlised and safe.
 
The unsecured depositors and note holders thus become as yet undeclared equity risk takers as their funds will be exhausted re-capitalising the bank under OBR direction.
 
Currently, local bank depositors do not get the prerequisite risk adjusted returns that equity investors associate with this type of investment and surely no where close to the levels of return on equity experienced by the owners of the banks.

“Current fees for KiwiSaver

“Current fees for KiwiSaver have been certified as not unreasonable by the Government Actuary and in future by the FMA,” FSC CEO, Peter Neilson said.
 
Does this man really believe the subjective term "unreasonable" can substitute for a detailed objectively defined numerical defence? All proprietary trading desks employ better than forensic analysis to break down the impact of  brokerage and any other fee structure getting in the way of final returns.
 
 

Two aspects:   1 - "Funding

Two aspects:
 
1 - "Funding will also be provided to support smart local companies to develop new products and create jobs" - by a buncha salaried brown cardies beholden to the Gubmint du Jour.  What could Possibly go wrong?
 
Think A123, Solyndra, First Solar - and that's just the Clean Green ones....
 
2 - "government-guaranted KiwiFund" if it accumulates sufficient KiwiFunds, will be regarded by pollies as 'lender of first resort' or a useful OBR pot'o'gold.  "We'll just Borrow a few hundred squillion to fund this amazing {insert yer Opportunity here}.  We'll put it Back before you Retire!  Promise!"
 
3 - (OK, I mis-spoke).  Some of the better funds (e.g. GMK now Kiwibank) are a) not unitised and b) can provide a breakdown of exactly what yer Investments actually are at each EOM.  I seem to be, fer example, the proud holder of Apple, IBM, Cisco and many other shares.  
 
Now just imagine them cardie-wearers struggling with Gubmint-du-Jour-approved Investment options. 
Apple?  No way, Head Green says.  Lookit FoxConn and all that slave labour. 
IBM?  Don't they supply the NSA? 
Cisco, don't they run a good chunk of the InterWebs and hence the NSA, plus supply hardware trap-doors for the ChiComs? 
Oh, wait, that last is a Plus!  Yer kin have yer Cisco shares.
 
Sigh...
 

UK Labour did this in the

UK Labour did this in the 70s?  we got Leyland cr*p as a result.  What it will become is a sink of good money into bad jobs.
http://www.londonlovesbusiness.com/business-news/politics/politicians-wa...
"Picking winners in business is what we did in the 1970s, when the government lost eye-watering sums on British Leyland and ICL."
Bound to be a success...second time around, really it is...
regards
 

But don't we pick winners

But don't we pick winners today? - taxpayer assisted irrigation schemes to grow dairy production and ultra fast broadband infrastructure placement come immediately to mind. Endeavours private enterprise resolutely fail to directly undertake for benefits the tax/rate payer is meant to perceive. 
 
Obviously the final returns on investment must be near negative or worse if the cost of civil engineering works are included, thus the model of socialising the costs, privatising the profits is called into service, yet again, by our parliamentary representatives.

being going on for

being going on for years
 
Direct Capital has agreed to buy South Canterbury Finance Ltd's 79.7% holding in Scales Corp from the receivers for $44 million.
The Auckland-based private investment firm will make the acquisition via its current fund, Direct Capital IV with the NZ Superannuation Fund and Accident Compensation Corp as co-investors.

And here's another - strong

And here's another - strong possibility of retrospective government legislation forcing the cost of a local government winner upon the financial shoulders of the Kaipara District Council ratepayers:
 
A representative from the Auditor-General's office was summoned to a closed doors hearing in Parliament to discuss its investigation into the Kaipara District Council debt crisis, the Sunday Star-Times has learned.
 
The council, now being run by Wellington-appointed commissioners, is struggling with huge debts after building a wastewater scheme at the idyllic Mangawhai Heads. A big rates rise it imposed to deal with the debt triggered a rates strike that has so far cost it $3.5 million in uncollected rates.
 
Parliament's Local Government and Environment Select Committee is now considering retrospective legislation to legalise more than $17m of rates illegally levied by the council.
 
According to a well-placed source, the committee wanted assurances from the auditor-general that there were no "unpleasant surprises" yet to be revealed about the debt scandal, before it decides whether to approve the bill. Read more

wow..... I really detest

wow.....
I really detest retrospective legislation....how the hell can you comply with a law today to be written in the future?
regards
 
 

Only in a command economy

Only in a command economy similar to that which Key pretends to rail against.

Oh lets not get emotional

Oh lets not get emotional with things like "command economy", simple regulation and legislation can and do work where needed, written properly and used.   Certainly to my mind we can see the mess from the last 30 years to say that a non-command economy (free market) is just as bad if not worse.
regards

I hardly consider an economy

I hardly consider an economy dictated to by the whims of the US Federal Reserve coincident with anything other than a command economy.

A very intersting take. The

A very intersting take. The very comment you make defines you for me, par I think.
regards
 

national need to tread

national need to tread carefully.  Could be a long time out in the cold.
 
http://www.roymorgan.com/

Dunno whether to be more

Dunno whether to be more worried about another National term, or petrified over a Labour/Green term. 
Lets see Labour roughly centre
mana, oh god, John Munto etc.
Maori party?  not good...
NZF, whinnie's 30 pices of silver for hs bribes...
and the Green's? serious signs of too left policy and blindness to the consquences...
Long time out? dunno maybe just 1 term....the left could cause quite a mess in 3 years though.
regards
 
 

Left, right, centre....bah

Left, right, centre....bah humbug. The Nazi's were fascist and would be called extreme right now but advocated a centralised state run economy and called themselves National Socialists. Communist parties everywhere have oligarchical leaderships and grant favours to select businesses and engage in massive corruption at the expense of the "people". Left and Right are meaningless - there's only power and money. Follow the money. The rest is bread and circuses. If you can tell the real difference between Parker and English, Key and Cunliffe, Rudd and Abbot, Cameron and Miliband.... you're one up on me.

Aj National do need to tread

Aj National do need to tread carefullly - the pending amendments to the Animal Welfare Act where new powers meaning farmers could be sanctioned if an animal welfare inspector believed they were breaking or likely to break the animal welfare law, without having to prove they had done so.  http://www.stuff.co.nz/business/farming/agribusiness/9299807/Farmers-fighting-proposed-animal-welfare-changes
 
People are starting to rail against being guilty until proven innocent and they way they will show it will be at the ballot box.  Some National supporters I have spoken to say they are going to show their dissatisfaction by not turning up to the ballot box this year.
 
Increasingly peoples rights to  due process of law is being taken away.  While officials who have not sworn to uphold the law, are given increasing powers to issue infringement notices/sanction people:
*Under the pending amendments above : so long as the officials believe someone is likely to break the law;
*an environmental breach is deemed a breach if it may have polluted had it reached a waterway (even if it didn't reach a waterway);
*Labour dept policy says helemts must be worn on ATVs on a farm but the legislation does not say they must be.  So farmers are issued infringement notices for policy breaches not legislation breaches. (Just for the record, staff on our farm are required to wear helmets on both 2 & 4 wheeled motorbikes)
 
I am sure the above, in some cases apply to non-farmers, and there are possibly other situations that affect non-farmers so my point is not solely relating to the farming sector but the overall way in which New Zealanders are becoming guilty until proven innocent in more and more government policy/legislation.
 

Welcome to the National

Welcome to the National Party's official website
The New Zealand National Party was formed in 1936 to represent New Zealanders from all walks of life.

Today National is the largest political party in the New Zealand Parliament and leads the government.

National stands for freedom, choice, independence and ambition. We believe in less government not more red tape. We stand for personal freedom and responsibility.
 
http://www.national.org.nz/About/welcome.aspx
 
 What they are after is total control
 
http://www.national.org.nz/policy.aspx

National used to  stand for

National used to  stand for private enterprise not unfettered free markets and small business including farmers, not corporations. Muldoon got a lot of things wrong but the answer wasn't Roger Douglas and Ruth Richardson

wtf, you are not wrong.

wtf, you are not wrong.

Amen...A.J. and gentlemen, I

Amen...A.J. and gentlemen, I have posts here going back years that state the Agenda was to Corporatise, becoming a direction of administration the like of which we had not seen before. 
 The speed in execution of the Agenda stands for all to see now......oh by the way..
 Air N.Z. has been  bone/cut to produce the meanest cleanest profit margin that it can possibly be when blocked.....and it will look frotha let me tell you.
 I'll tell you there are a lot of unhappy people out there just marking time. If you could get inside  you'd find the Corporate animal run wild . Rob Fyfe's door used to be open, the door is now under lock out to all personel who do not meet the security level...Why..?
Because the walls are awash with the plan, the plan deemed too sensitive to share with senior staff.......Only top level Corporate entities are privi to the plan.
Prediction  air N.Z., it will stack up and sell well...then all down hill for the hapless investor over the following years.
Trust me on this , very very disgruntled senior management right across the board forsee a decline in the brand coming post the float.
It's not about people ....anymore.

Yep the unions have have

Yep the unions have have managed for the moment anyway to prevent the "outsourcing" or contracting out of flight crew as per Chorus, Telecom etc did with their staff. Aircraft on leases, flight crew contracted to a third party. Make them operating expenses easier to dispense with at will and reduce fixed overheads. Somebody will do very nicely with contracting but it won't be the flight attendants. Costs cut, books made pretty, bonuses paid, see you later, moving on to "new opportunities."

Tell me about it, as a

Tell me about it, as a regular flyer over the last year things have changed. Much more expensive to fly from North America to NZ. The planes are old, the service is like a bus. They try to extort money out of you, its like choosing a cell phone plan.
  They must be terrified of Emerates, once they get some USA routes out of NZ then its curtains for Air NZ.
Very sad that we have come to this.
National are going down with the ship.

Recall that it was Michael

Recall that it was Michael Cullen who,  in a xenophobic hissy fit , scuttled the Dubai partial T/O of Akld Airports ...
 
... which would have brought massive development at the airport , and made Auckland the Asia/Pacific hub for Emirates ...
 
And AirNZ could've coat-tailed in on all that extra passenger flow ... but they too , agreed with Cullen , and shot-down the Dubais ....

Yes SH. This Mangawhai

Yes SH. This Mangawhai debacle crossed my mind this morning as I listened to the Three Amigos: Key, Joyce and Grocer, railing against Crown Law's opine on the Amigos' juvenile Bill to bind the Crown, perpetually, to their dirty deal with the casino ( any half-good year one law student knows the doctrines, Rex is Lex and Ex Post Facto). And at the same time THEY are planning to do just that to the citizens of Kaipara. Woe be us! these creeps that have snuck in and taken over our National Party are likely to cause such widespread revulsion in the country that next year the Labour/Green Aliens will takeover.
Ergophobia

Thanks Ergophobia, I noted

Thanks Ergophobia, I noted the doublespeak here.  I don't equate the "Three Amigos" with traditional National party politics, but I never expected the likes of Lange to allow Douglas et al a free reign.

Good work SH, you're very

Good work SH, you're very vigilant.
Regards, EP

Yes very true....irrigation I

Yes very true....irrigation I really wonder on financially let alone the environmental impact..
Broadband, well that introduces competition, my present cost of $200 a month for 150gb will drop to $120 for 250gb.  Makes BB available in areas not otherwise available?  A harder call on that one. 
Now I think there are instances where infrastructure makes sense, water, transmission lines....so a hard Q to answer.   "the model of socialising the costs, privatising the profits is called into service" yes exactly....
regards

Who is John Key trying to

Who is John Key trying to fool?
The JK government gives us a Super City, Super Ministry, Amalgamates schools and so on but if anyone else tries it they are communists.
Is he and his government communists or are they just trying to be like China and have everything centrally controlled?

I think the term you maybe

I think the term you maybe looking for is the generic fascist....
"a way of organizing a society in which a government ruled by a dictator controls the lives of the people and in which people are not allowed to disagree with the government".
JK as a central figure? yes. Communism would tend not to promote the individual I'd suggest. 
regards
 
 

Communism would tend not to

Communism would tend not to promote the individual I'd suggest. 
 
Stalin led an unmistakable life doing otherwise.

This PM and his 5th National

This PM and his 5th National Govt are communist; they've just skipped the messy proletariat part and >> oligarchical. They have many a sycophant here.
Regards, EP

but "communist" russia wasnt

but "communist" russia wasnt really communist now was it....and I thought you were bright enough to spot that..........
regards

and I thought you were bright

and I thought you were bright enough to spot that..........
regards

 
Not really and I spent quite a lot of time visiting what you now call non-communist countries during the cold war negotiating business on behalf of the US bank I worked for.

The fees definitely need to

The fees definitely need to come down if you are in kiwi saver in a conservative cash deposit fund.  You make more money in a term deposit at the bank than if if pay a kiwi fund manager look after it with expensive fees in kiwisaver, when the fund manager is doing nothing difficult. Kiwisaver is supposed to help for retirement but you are actually loosing money for retirment in the conservative funds due to fees.
Addtionally Maori and Pacific Islanders should be able to access kiwi funds earlier based on average life expectancy as many many not reach the age of entitlement due to unhealthy diets high in sugar, fats etc so they should be entitled at the age of 55. 

I agree on the fees and the

I agree on the fees and the mediocre if not negligent management.
Early access, no I dont agree, on diet, diet is their choice.  It also applies to the poor in general, white, black, yellow, whatever.  What if you are 1/2 maori?  what about 1/16th?  1/64th? where is the line drawn?  Somone could be overweight on a deskjob and fine, however someone of correct weight but hard physical work?  body worn out.
Now if they permanently move back home and take the funds with them, yes maybe.
regards
 
 
 

"if they permanently move

"if they permanently move back home"
Who?

Yer reckon he means the Maori

Yer reckon he means the Maori should go back to Taiwan ?
 
...  steven's fast becoming as daft as Winnie Peters ...

Really GBH, how

Really GBH, how inane....
regards

"Pacific Islanders" regards

"Pacific Islanders"
regards

What are you saying? Like

What are you saying? Like thanks for your the contribution to N.Z. of your labour, your culture etc. Now you can go back 'home'.

Hi, No Im not saying what you

Hi,
No Im not saying what you imply, and anyway,
Labour, well they have been paid for it.
Culture well they have seen and had ours free of charge.
I recall a case where a pacific islander wanted to return to (samoa?) as it was cheaper to live there and he had his native culture, family and a better climate. He couldnt due to some pension issue (which I think got resolved). Now if a NZ based worker chooses to return home permanantly I have no problem with them and indeed I think its fair that they can take their savings with them, or leave it here until 65 if they so choose.
regards

What we need to understand is

What we need to understand is that on on average Maori and Pacific islands die on average 10-15 years younger than European due to livestyle choice.  what we want is that Maori or Pacific Islanders should be able to access funds due to health issues before the age of 65. As if they die before they are entitled to receive the fund at the legible age then the money they have been saving will go to the government coffers or to next of kin ?