Dumb excuses for not joining KiwiSaver

Investing

14th Dec 10, 9:51am by Diana Clement

by Diana Clement

If ever there was something that brings out the dumb excuse brigade, it’s KiwiSaver.

There aren’t many investments that offer a 150% return on your money on day one. That’s what you’ll get from your KiwiSaver if you make a 4% contribution matched by the government and topped up with another 2% of your salary from your employer.

Here are some of the dumbest excuses for not joining KiwiSaver:

I don’t trust the government: there will always be paranoid folk who don’t trust the government. Some are even building underground bunkers. But they’re cutting off their noses to spite their faces, by turning their noses up at the $1,000 kick start, $87 a month of government money, and 2% of salary from their employer.

Why should I give my money to the government? It’s not unusual for people to believe that the government is investing their money. It’s not. Kiwisaver funds are run by approved providers such as Westpac, AMP, and Gareth Morgan KiwiSaver, with the money held in trust.

People have lost money in it: by an historical accident KiwiSaver was launched at a bad time – just before world share markets went into free fall in the global financial crisis of 2008 and 2009. As a result, when the fund providers released their early results, the returns were abysmal. But a bit of volatility never lost anyone any money. You’ve only lost money when you sell up, which you can’t do with Kiwisaver until you retire.

You can’t trust the KiwiSaver providers: you choose which provider you go with. If you’re not comfortable with a provider you’ve never heard of, you could choose your bank’s Kiwisaver. ANZ, ASB, BNZ, Kiwibank, National Bank, and Westpac are all Kiwisaver providers trusted by New Zealanders to look after their savings.

It’s run by finance companies: it’s not unusual to hear people confuse finance companies with KiwiSaver providers. Anyone can set up as a finance company. Kiwisaver providers are vetted heavily by the government, which doesn’t want to risk scandals. “It’s like comparing the Queen Mary with a canoe,” an AMP person once said about members of the public who couldn’t tell fund management and finance companies apart.

I won’t get any state funded superannuation if I have KiwiSaver: no-one can guarantee there will be state funded superannuation when they retire, or that it will have the spending power it does now. Whether or not there is KiwiSaver, people do need to save for their retirement or risk living out their twilight years in poverty. If new rules come in that are patently unfair, the population will rise up against them as they did with the super surcharge in the 1990s.

You don’t get proper access to your own money: the point of Kiwisaver is that you’re saving for your retirement not your next financial whim, which is one of the reasons you can’t access the funds.

KiwiSaver will change its spots: already the government has changed the rules and many people think the goalposts will keep moving. As one poster on Trade Me said: “Only a fool would trust governments not to change the goalposts over a period of a working lifetime.” Retirement schemes do change over time, but you still have your savings. The government is highly unlikely to do away with Kiwisaver because it realises that Kiwis need to be encouraged to save for their retirement.

I only invest in property: sensible investors spread their risk. The property market can be fickle and investors who think they are six foot tall and bulletproof in the boom times sometimes come unstuck in the bust. Putting 2% or 4% of your earnings into KiwiSaver is a small hedge against having too many eggs in one basket. Over time, your KiwiSaver pot starts to grow, you’ll be glad you’re in. You’ll also get the government tax credits, which you wouldn’t by investing exclusively in property.

Your say: will you join KiwiSaver?

Links:

KiwiSaver data from interest.co.nz
https://www.interest.co.nz/kiwisaver

KiwiSaver news from interest.co.nz
https://www.interest.co.nz/search/node/Kiwisaver

Should we or shouldn’t we
http://www.trademe.co.nz/Community/MessageBoard/Messages.aspx?id=467679&p=1&topic=5

Many good reasons to become a KiwiSaver
http://www.stuff.co.nz/business/money/4328777/Many-good-reasons-to-become-a-KiwiSaver

Is KiwiSaver right for you?
http://www.kiwisaver.govt.nz/new/situation/ks-situation-index.html

Kiwisaver fees calculator
http://www.sorted.org.nz/calculators/kiwisaver-fees/

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90 Comments

by Troy | 14th Dec 10, 10:27am 1292275661

WOW!! This is truly an optimistic view of the future. It’s not taking into account any market volatility. In fact you seem to gloss over the largest volatile in my lifetime as if it were just a minor hiccup. I'm sorry but i would love to see the Government encourage Kiwis to save but the Ponzi-saver scheme is not the answer. Maybe if the government had a tax incentive to buy Bonus Bonds. Ponzi-Save will just turn into a large entitlement headache for future Kiwis. Just ask the US about Socialist Security and how well that is going.

by Chris | 14th Dec 10, 11:58am 1292281114

The stupid is strong in this one.

by Troy | 14th Dec 10, 12:03pm 1292281393

Whom are you referring to as "stupid" exactly, me or the author? Either way its poor form to reduce a debate to name calling.

by Chris | 14th Dec 10, 12:59pm 1292284752

You.

The author is level headed and rational. You are not.

by Troy | 14th Dec 10, 1:02pm 1292284937

Now Now, Maybe you should just go back to the corner of the internet for a timeout and let the adults talk this out.

by Steptoe | 16th Dec 10, 4:42pm 1292470968

Old saying

"Violence is when one runs out of intelligence"

Which in this type of media amounts to personal attacks and insults.

When a debater has to resort to such tactics, they have lost creditability and the debate....unless one is at Oxford and references uranium and bad breath in the same sentence,

by chrissy | 14th Dec 10, 10:45am 1292276743

I believe in kiwisaver. But only for other people.

There are more proactive ways to invest which offer greater flexibility, less red tape and less fees. Changes can be implemented without answering to anyone.

I think flexibility is more important in these modern markets. Kiwisaver could become a big monolith. The incentives only promises enough to entice members, no more and no less.

May it be the 'magic formula' for everything that is wrong about NZ.

by steven | 14th Dec 10, 3:51pm 1292295107

The point of Kiwsaver is to get ppl saving who might otherwise not....small savers not big/high savers/investors.

If it wasnt for the Govn subs, I'd agree with you, however as it currently stands putting in 2 or 4% for a year is a no-brainer, the return is huge....not only that you can stop paying in...

I have a number of small Govn inhanced investments like this, they pay well above the odds....outside that, yes do your own thing....by far the best IMHO.

regards

by Over time prop… | 14th Dec 10, 11:56am 1292281013

Those arguments are so on the money. I advise people in regards to kiwiSaver and so many people use the above arguments. You just want to slap them. Also the people like Chrissy that think kiwiSaver is good for other people but not them. From my experience people who say that genneraly own a small struggling business or can't afford to take a 2% hit on their pay. But of course they can do better than the guarenteed 100% return on money.

The best line I have heard was from a beneficiary who did not trust the government. I said to him you do realise it is the government that pays you don't you? I swear he seemed surprised by this.

by rc | 14th Dec 10, 2:30pm 1292290208

Until fund managers change their fee's to a % of profits made rather than a % of your capital, I won't go near them.

I also wouldn't rely on the govt tax credits forever either, I'm sure the govt will be carefully considering removing it in the near future!

by steven | 14th Dec 10, 3:52pm 1292295156

They may well, but at that point you can stop paying in....and invest elsewhere.

regards

by chrissy | 14th Dec 10, 2:38pm 1292290698

I don't believe in kiwisaver for other people too. But wouldn't try having sensible dialogue with them to change their minds either.

It is belief system. A bit like atheist vs religion (pick one).

The future needs to look bright before happily COMMITTING to investing long term.

by _Phil_ | 14th Dec 10, 2:57pm 1292291820

Diana,

The Government reported some shocking numbers today.

My reason for not joining is I have plenty of money, am more than capable of funding my own retirement and have absolutely no desire to have the Government borrow more money to redistribute it to me.

Your reasons pretty much assume everyone wants to be a happy little socialist and thinks only of their own individual outcome.

Alas, there are still a few psychotics out there who actually don't want to take money redistributed from other people.

Shocking, huh?

by lakeside | 14th Dec 10, 5:37pm 1292301461

I have been in Kiwi saver (superllife) 11/2 years or so I have payed about $3000 my boss $3000 the govt abot $2000 and investment earnings about $1200 so that is pretty good $9200. Fees were covered by the govt at first but now maybe $40 a year.Actually $49 so far & $40 credit (but is no more) I can have it in cash or international shares or whatever to balance my other investments. There is a bit of tax ($39) but it is a PIE so less than if I had it in the bank. It's a no brainer for anyone over 18. Marginal for kids really although I have got the kids up to $1200 from the free $1000 but there are no handouts till 18.

by Nicholas Arrand | 14th Dec 10, 5:44pm 1292301840

And if the Government comes out tomorrow and says " Okay. Kiwisaver ~ We have absorbed it into the national accounts to help balance the books. You will all be looked after at retirement age, so not too worry". How much do you have then, lakeside? Nothing.

by lakeside | 14th Dec 10, 8:54pm 1292313295

The money is mine in an independant company with trustees etc ... the govt is no more likely to take my house or my bank account off me. I admit inflation could devalue the money or rules may change in the future but I can freeze my contributions any time. It's the best around.

by Hamish | 15th Dec 10, 5:00pm 1292385605

and you can't have it until you're 65.....

by lakeside | 14th Dec 10, 9:10pm 1292314227

I understand the view about govt taking money and spreading it around but a ASB Cash kiwisaver is money in the bank earning interest, not a Ponzi which is lending money to pay interest.

by Justice | 14th Dec 10, 9:39pm 1292315940

Ah, clearly you have NO IDEA how western economies actually work! Just about every economy works EXACTLY like a ponzi scheme, hence the WORLD financial crisis!

Interest is paid out because of inflation, inflation is created because of QE and asset value BUBBLE speculation devalues currency.

Example: imagine a system where NO interest was paid on currency? You would have to save (without interest) for that house cause no bank would be making money off YOU in interest, No interest on savings would mean less asset speculation and NO bubbles. BUT on the bright side there would be relatively NO inflation EVER to speak of and the REAL value of assets and currency would be very easy to determined. Giving out interest helps create the Ponzi scheme

by Justice | 14th Dec 10, 7:13pm 1292307180

As usual these PRO KW's commentators love glossing over the reality of this blantantly ridiculous scheme.

First are the costs of it: IRD and other government admin, the paper shuffling, the fees and hidden fees

Second is the value: the 150% return is BS! It's coming from taxpayers either via their reduced wages over time that employers use to subsidise the scheme AND OR the other hand that government uses when giving 'the people' anything, YOU KNOW the hand that 'takes away" via other taxes.

And when it comes time that many of you wish to claim your OWN tax subsidised nest egg, You will find that 'austerity' has eaten it away or about too.

by lakeside | 14th Dec 10, 9:05pm 1292313922

You could say the same about your wages! Cost to administer, money comes from somewhere, gets taxed and ACC taken off and fees charged if you invest it, you could give it away/put it in the rubbish. Get real!

by Justice | 14th Dec 10, 9:50pm 1292316638

Your taxes don't pay for it though and 100% of my wages come from my OWN labour and productivity as a business owner and CEO. KW is just another parasitic benefit much like WFF's that steals from the productive population and gives to the useless can't get my life together crowd who are holding back & bankrupting this country and their children’s future.

KW is just another socialist handout! who created it? Cullen, the rich prick hater

by Over time prop… | 15th Dec 10, 3:46pm 1292381160

If you are a business owner 100% of your wages don't come from your own labour unless you are the ceo of a Jim's Mowing franchise. I am in business myself but at least I know I am making money off the back of my employees. Don't kid yourself that all your hard work alone gets you rich.

by KiwiMike | 14th Dec 10, 7:25pm 1292307917

I'm 30 and I'm not joining as I know by the time I'm ready to retire, the retirement age will have slowly been pushed out to something crazy like 80. I think the money is safe in kiwisaver, I just don't want the government having control over when I can start using my own retirement money. Then again I'm self employeed. If I was getting an employer contribution I might reconsider haha.

Out of general interest, are there any safeguards for current members with regard to the retirement age (and thus the age you can start accessing kiwisaver) being pushed higher and higher?

by lakeside | 14th Dec 10, 9:00pm 1292313643

It's in the prospectus you can get your money at 65 or leave it in like any superscheme. If you are buying a first house you can get your contributions back plus more money for a deposit. If you die it goes to your estate. If you leave the country you lose the govt money but get your own money back.

by KiwiMike | 14th Dec 10, 9:45pm 1292316307

But doesn't the fine print say you can get your money when you reach the age of eligibility for super "Most people become eligible to get their money when they qualify for NZ Super (currently 65)." (http://www.kiwisaver.govt.nz/new/about/how/ks-works.html). They can then change the age of eligibility to super in coming years.

by Justice | 14th Dec 10, 9:54pm 1292316867

Exactly, watch as the goal posts are changed VERY soon

by Living in Clover | 14th Dec 10, 9:24pm 1292315040

Hey Diana,

It's the fees that put me off. why do the fund managers take a % of your capital? At a 1% fee rate which is quite cheap you only have to have 100K invested and your 1K from the Govt is gone in fees.

I see Gareth Morgan Kiwisaver has some 460 odd million under management (and he is not the biggest) , than means he is raking in 4.6Mil + a year in fees ! I mean let's be realistic shall we!

by Diana Clement | 15th Dec 10, 12:40pm 1292370000

Hi Living in Clover,

This is an issue that really bothers me as well (fees in general - I won't comment about GMK). Over time these funds are going to grow huge. Will the government step in and lower the charges at some point?

Kind regards

Diana Clement

by Gummy Bear Hero | 14th Dec 10, 9:28pm 1292315287

Some time ago I had a squizz at the Kiwisaver Fund run by Fisher Management ( Carmel Fisher ) . They levy a 2 & 20 % fee , the same basis as high flying hedge fund managers in the US do . You pay an annual fee of 2 % , irregardless of whether the fund makes a penny of profit for the members . And if they do profit , the fund manager takes 20 % of the profit , as well as the 2 % annual fee .

This is highway robbery ! Gareth Morgan was correct, before Michael Cullen introduced Kiwisaver , that it is corralling the ordinary workers of NZ into the arms of the fund management industry . And these guys have had a long history in NZ of overcharging , and underperforming . The greed of fund managers who charge 2 & 20 % bears out Dr. Morgan's warnings totally .

by lakeside | 14th Dec 10, 9:29pm 1292315346

OK my wife is not employed and has been in from the start (3 years?) paying in $1000 or so a year. As of tonight she has paid in $3742 employer $0 Govt $4130 investment earnings (ok GFC was bad) $141 tax paid $60 fees $115 fees subsidy (now stopped) $80. Still a good investment $7900 and counting. Money for jam, and a small amount of my tax back. All the govt does is make rules for the providers and give you money. Too good to be true?

by Justice | 14th Dec 10, 9:57pm 1292317025

IT'S A PONZI SCHEME ! There is no money for nothing. Wake up man

by Gummy Bear Hero | 14th Dec 10, 10:08pm 1292317710

Yes ! It is your own tax paid dollars being regurgitated back to you , after a few bureaucratic fees ( at your expense ! ) . And then locked up so you can't touch it ...... your own munny , remember . And the fat cats in the fund managers office will lavish generous salaries , bonuses and executive lunches for themselves ....... At your expense .

It's your own bloody munny , not the government's , lakeside .

by Over time prop… | 15th Dec 10, 3:48pm 1292381327

Of course you are right, but at least if you are in kiwiSaver you get some of it back. The ulternative is not join and see your tax dollar given to someone else.

by Number 6 | 15th Dec 10, 3:59pm 1292381996

At the moment. Time will come when the Government 'absorbs' your money with an...,"Ok. If you want to keep 'your' private Kiwisaver, then there's no Government pension, as well, at (whatever the retirement age is). But, if you 'transfer' it back to the General Public Scheme, then we will give you both". That's how they will get their hands on (1) their money back and (2) the money you have chipped in with. Stay 'private' if you wish, but don't expect to get a National Super top up as well.....Or something like that....

by Gummy Bear Hero | 15th Dec 10, 4:18pm 1292383083

And it is a monumental piece of arrogant thinking by Michael Cullen , that a bunch of " whizz kid " fund managers will do a better job of investing your money than you can ............. The history of the fund management industry in NZ would suggest that you will be sorely disappointed , as the years roll by .

So we have a trifecta of an un-means tested NZ Super , the Cullen Fund , and Kiwisaver ! How bloody ridiculous . A means tested NZ super , gradually lifted to 67 or 68 years of age for kick-in , is all we needed .

NZ = Nation of Zombies ? It would seem so .......... Sadly .

by lakeside | 14th Dec 10, 9:37pm 1292315830

ASB, Super life and ING are currently the lowest fees about 1% Gareth 2% Brook & hujich 3% but they are all better than nothing. Certainly hard to work out the fees. Probably worth $25 000 or so difference over a lifetime but better performance would be worth it.

by Hamish | 16th Dec 10, 9:16am 1292444170

ING managed funds. Yeh, they're a winning bunch.

by sctajc | 14th Dec 10, 10:47pm 1292320031

I joined Kiwi saver as being self employed I only had to pay in about $1,200 a year to get $1,200 a year of my own money that I had paid in taxes. The returns are a joke and always will be. Look at any long term investment fund over the last 30 or more years. Kiwi Saver is a no brainer for people with no brains.

A better Kiwi Saver scheme would be to allow people to pay say up to $20,000 a year in tax free, make income earned tax free and pay tax when money is withdrawn at the then tax rates. This would cut out it being funded from general taxation and all the associated bureaucratic costs as what currently happens. The lost tax revenue from the $20,000 would more than be compensated by the current cost in income tax to the tax payer. Also means a Kiwi Saver could freely withdraw if becomes unemployed or starting to pay off a mortgage (as a mortgage is very expensive money).

by Gummy Bear Hero | 14th Dec 10, 11:56pm 1292324175

Here's a novel idea , how about the government leave more of YOUR munny in YOUR pocket , so that YOU can control YOUR future , rather than rely on them or on some scummy fund manager .

Who knows YOU better , and can better manage YOUR munny and dictate YOUR future , YOU , or some prats in a flash restaurant in Wellington ? .......

........ Join the dots if YOU need to . But I reckon that YOU are a smart dude , and YOU will suss it out .

by JimboJones | 15th Dec 10, 5:14pm 1292386444

I don't agree - more money in an average NZers pocket means more money they can spend on housing and consumption. They only way most NZers will save is if they are forced to. Yes it may mean that the smarter NZers are forced into savings that have worse returns than they would have otherwise invested in, but it is better to have everyone saving with crap returns than a handful of people saving with good returns

by Gummy Bear Hero | 15th Dec 10, 6:20pm 1292390454

If folk wanna splurge their munny on consumption or on housing , so be it ! It is their money . Their right to be foolish or to be sensible with it . Maybe now they need housing , maybe later they need to invest in shares , or in their own business .

Either / or , let the individual decide how to utilize their money , which they earnt ! And if they think that ferret farms or a fund charging 2 & 20 % are the way to go , then that is their free choice .

by TraderX | 14th Dec 10, 10:53pm 1292320414

The comments of some in this thread make me laugh/cry.

I think of kiwisaver as a tax on stupidity, those who are too lazy, fearful or stupid to take it up are paying for it but get none of the benefit (by their own choice).

It is a good scheme that will make a vast difference to those who are part of it.

It will change the culture of spend, spend, spend in this country.

It's the one good thing the labour government did in its 9 years.

My advice would be to go for either a very low fee provider (Superlife) or if you like active mangement Gareth Morgan who provides great commentary and data on your investment and is honest.

Cheers

by Diana Clement | 15th Dec 10, 12:45pm 1292370300

What amazes me with online discussions about Kiwisaver is how emotional they are. It seems that lots of people feel an emotional need to justify their decision. Much more so than other investments.

Having said that, I remember being incredibly frustrated with a Kiwi friend when I was in the UK. Her nice mortgage advisor had recommended getting a Pension mortgage - where the repayment vehicle was a pension. She only planned to stay in the UK for five years maximum at that time, but a pension required that she contribute until she retired. She argued black and blue to justify her position that the mortgage adviser was a nice guy and knew what he was talking about....

I'm glad, at least, the the comment on here is more informed than some of the comment I read on the Trade Me forums:

http://www.trademe.co.nz/Community/MessageBoard/Messages.aspx?id=467679&p=1&topic=5

by laurence | 15th Dec 10, 1:50pm 1292374200

Here are some of the ~~dumbest excuses~~ ‘best reasons' for not joining Kiwisaver:

I don’t trust the government:

Really means ‘I don’t trust the government to not change the rules’. The is valid as the rules have already been changed and are guaranteed to be changed before you see your money again.

Why should I give my money to the government?

Really means ‘Why should I give my money to anyone else’. Prudent advice from my father was ‘always keep control of your money. If others are so smart with it then why are they asking for yours?’ This advice made him wealthy in retirement (from 50 yrs) and has also made me financially independent.

People have lost money in it:.

Without the government component everyone in kiwisaver is out of pocket on ROI. Employer contributions can be got around. Add the management fees and they are way out the back door even on the best schemes. The markets can stay irrational longer than you can stay solvent. I have yet to loose investment during the GFC.

You can’t trust the Kiwisaver providers:.

Most of the above institutions have had and closed poorly performing investment funds, ANZ in particular. Savings were covered by the government guarantee, kiwisaver is not. Savings are core to the banks solvency and profitability, kiwisaver funds are not.

It’s run by finance companies:

Queen Mary or Titanic? See above re keeping control of your own money. Funds manager history is very questionable and variable. There are no longer any doubts or questions re the finance companies. A lot of fund managers lost money in the finance company debacle.

I won’t get any state funded superannuation if I have Kiwisaver:

The super surcharge was dropped by a popularist but nonsensical uprising. My multi millionaire parents love getting their extra few hundred a week, despite having no use for it. Thanks all you poor citizens for the sacrifices. No guarantees that an uprising is sensible or fair, it really depends on the power of the benefiting group.

You don’t get proper access to your own money:.

See above re always retain control of your money. Thisbecomes especially important over the long term as your circumstances change. Financial self control is crucial, learn it.

Kiwisaver will change its spots:

Super policy in New Zealand has been a constant changing of spots and will continue to change spots. Contributions holidays aside (holiday criteria is bound to change) there is no ability to leave kiwisaver irrespective of what circumstance, economy or rule changes occur over your lifetime. Hotel callifornia anyone?

I only invest in property:

Investment diversification is important, liquidity is important, control is important, returns are important, security is important. Kiwisaver does not address these

Your say: will you join Kiwisaver? NO and no $1k bribe will alter this.

by shorts | 15th Dec 10, 2:30pm 1292376652

2% isn't that much to play with for most people. At the moment I have contributed $6K, by employer $6K and the govt $4K. My average cost per unit has been 98 cents per unit, and the current exit price is $1.12. If I contribute at the same rate for the next 35 years I will have contributed $70K and, assumming the same ratio of cost per unit v exit price, I would have around $200K. Factoring in a return of 2% would give me $400K,

Investing $2K pa at 4% in the bank would return me $150K. Of course I expect to have another $1m + tucked away through other investments and another $1m + in inheritance, but it's a better return then buying lotto tickets.

by laurence | 15th Dec 10, 2:48pm 1292377685

Yep $400k in 35 years time is really going to make the difference. This projection is also based on the government (and employers) sticking with the program. 35 years ago Rob Muldoom had just thrown out Norm Kirks aussy type super scheme. I find it a bit hard to therefore project forward another 35 years with any surety re super schemes. Insurance company retirement schemes of the day were selling endowment policies paying out $4k+, yippeee sure would have provided for your future in 2010!

Better I think to work on the $1mil etc schemes you propose.

by Ms de Meanour | 16th Dec 10, 8:53am 1292442783

Here is the news, Laurence: if you are a confident, capable investor who does not think $400k is a large amount of money, then KiwiSaver isn't meant for the likes of you and you are quite right not to join it.

For others on a lower income who don't have the skills to manage money optimally, however, KiwiSaver is likely to be the easiest way to make a real difference to their own retirement prospects.

by JimboJones | 16th Dec 10, 10:02am 1292446939

The thing is, what will $400k be worth in 35 years. It sounds like a lot of money now, but so did say 40k 35 years ago. Of course your payments into Kiwisaver will increase over time as your wage goes up with inflation so it will probably be more than $400k, but unless you are getting a return on your investment (and the Government's) that is at least as good as inflation after tax and fees (which I think knowing these types of funds is probably debatable), then it doesn't really matter how much the government and your empolyer is paying in, it will all seem like pocket money in many years time.

I did a calculation that suggested that I was actually slightly better off putting my money into a 7% mortgage for 35 years without the government and employer contribution than I was putting money into KS assuming a net 3% return from my 'provider'. 7% compounding actually worked out better than 150% non compounding + 3% compounding - quite amazing! However I still joined Kiwisaver more as a diversification than anything else.

by sctajc | 15th Dec 10, 5:35pm 1292387724

You make real sense Laurence. Unfortunately we NZers like our Mummy & Daddy state to tell us what to do (we can't think for ourselves) and to tuck us up at night telling us everything will be ok. For all the reasons already outlined above Kiwi Saver in its current for is a joke. Anyone who in 20 or more years who thinks they are going to have a financial security shows naivety of how finance works.

by shorts | 15th Dec 10, 3:21pm 1292379660

We are talking about peanuts so it doesn't really worry me too much. At worst I'm betting $70K over 35 years on possibly getting $400K plus back. If employer and government contributions stop then my contributions stop as well.

We are already up to $600K on our own and the olds and the inlaws are worth somewhere between $5M and $8M so long as they just keep most of their money in the bank and we don't get in their bad books the inheitance cheque is almost in the mail.

by laurence | 15th Dec 10, 4:20pm 1292383255

Great Shorts going well...except kiwisaver has no exit clause (Hotel California!). Govt & Employ contributions can stop via policy but you may have to keep going if you are PAYE employed.

by PhilBest | 15th Dec 10, 3:42pm 1292380920

NOT on the list of excuses, I notice:

"My income and expenses are such that I cannot save money. Period." "I go without essentials already".

That's a LOT of Kiwis in that bracket; tough reality. We are a low wage economy and a high house price economy. This is economic Darwinism. Making urban land a fair price again is the first step to getting any restoration in the economy as a whole.

by Billy | 15th Dec 10, 4:36pm 1292384202

Some questions:

1. What if the kiwisaver provider goes bankrupt before you reach 65years old?

2. Is your kiwisaver savings really guaranteed? By whom?

3, Is there a possibility that when you're 65 years old, you will get back less than your contributions (incl exployer's contributions) ?

by Wolly | 15th Dec 10, 5:33pm 1292387639

Kiwisaver has to be the best conjob done on the peasants since the Maori were done out of the land....credit where credit's due...to be able to reap political capital out of a scheme that makes people think they are getting something for nothing....fabulous...even better to do it with their own money...and to fatten the wallets of the fund managing rorters for yet more brownee points...!

by amalgam | 15th Dec 10, 6:38pm 1292391528

What I find most interesting about this thread is how all of a sudden a bunch of brand new posters have appeared, and their first posts are all supportive of KiwiSaver.

by lakeside | 15th Dec 10, 10:16pm 1292404584

Well it's something we can know a bit about, unlike the mysteries of bonds, property etc.

I can't see that KS is the whole answer but surely NZ share or property investors could diversify by havinng a KS with overseas bonds or cash or overseas shares.

I don't think the fees are worse than any other unit trust or super scheme.

And the hold till retirement is so you don't take the money & run. What is sinister about that.

It's more likely all the pseudo trusts and property & business tax dodges people rely on for retirement will be nipped in the bud than a govt set up superannuation scheme in your name be taken away.

by Bullitt | 15th Dec 10, 10:30pm 1292405423

I find the number of highly pro kiwisaver people interesting. Sure its easy to argue Kiwisaver is good for (most) individuals, its almost impossible to argue its good for the economy as a whole.

Theres plenty of 150% return arguments raised, only in the first year then every year you get a significantly lower return than the year afterwards. Over 40+ years the government top up is inconsequential compared to the investment return (especially considering how few years that government top up will be around for).

The main reason for me is control. Sure if I'd put say $3,000 into it I might have $9,000 in my Kiwisaver account by now compared to $3,500 in another investment. But what value is that $9,000 to me, I can't access it for 40 years, I can't use it to pay down interest bearing debt, I can't use it for more profitable investments, I have no control over what age I can access it (not a chance it'll be 65) and I'm very confident I will never receive it as a lump sum...by then people will be forced to buy an annuity with it.

I acknowledge I would have a (marginally) higher paper net worth if I was in Kiwisaver but that doesn't mean I would be better off. Even if you didnt agree with that I believe my principles are worth more than being bribed with $1,000 of my own money. Much the same way as I have been vocal against interest free student loans even though I personally benefited from it.

I will consider Kiwisaver again when Mary Holm starts advocating people put more in than necesary to get the top ups. Till then its blatantly being bribed with your own money in a very inefficient way.

by AndyC | 16th Dec 10, 12:52pm 1292457170

and I'm very confident I will never receive it as a lump sum...by then people will be forced to buy an annuity with it.

I hadn't heard that before. It would certainly concern me if this did in fact happen.

Could you expand on your reasons behind this statement Bulitt? Do you have any evidence behind this, or is it a gut feel.

by Bullitt | 16th Dec 10, 7:43pm 1292481802

No inside knowledge at all. I just figure someone who takes their money out of kiwisaver in a couple of years time might be able to buy a small new car with it. Someone who has been in it for 40 years will get a large amount of money in one lump. Given Kiwisaver is supposed to help financially illiterate people who would trust those people to be responsible with such a large amount of money given they need it to survive the next 20 or 30 years.

by I Am The Man | 17th Dec 10, 4:55pm 1292558103

Someone who has been in it for 40 years will get a large amount of money in one lump.

But will it seem 'large' by 2050?

by lakeside | 15th Dec 10, 10:56pm 1292407016

so much funny logic here...

It's sensible for an individual ... (best return, security of cash) but it's inefficient. At what point does 1% fees on superlife or ASB become efficient 1/2%?

They are charging too much so will become rich ... but they will go bankrupt.

Why should the government care about how $1000 they gave you 20 years ago is paid out from a savings fund,

It is just the value of the underlying shares eg FBU, TEL or whatever that determine what you get.

It's just one of many investments I have and it is long term.

Name one intelligent comentator who says it is a foolish investment.

by Gummy Bear Hero | 15th Dec 10, 11:15pm 1292408114

Dr Gareth Morgan .

by Over time prop… | 16th Dec 10, 11:35am 1292452554

If he thinks KiwiSaver is foolish, which it may or may not be. Why would he be offering a kiwiSaver scheme? Unless of course he is motivated by 100% self interest.

by Gummy Bear Hero | 16th Dec 10, 12:54pm 1292457252

After it was established , Gareth Morgan saw the usuriously high fees that some KiwiSaver providers were levying , and decided to offer a low fee alternative for Kiwis . As he railed , many in the funds mangement industry are motivated more by personal gain , than by providing a competitve service . Some truely believe that they are high fliers a'la hedge fund king George Soros , and charge fees accordingly . ......... Time will show that the NZ fund managers are worm burning scudders , instead !

If fund managers really did a better job of investing than the average Joe & Jane Kiwi , we wouldn't need compulsion by the government to invest with them .

by Nicholas Arrand | 16th Dec 10, 1:02pm 1292457749

I second that GBH. Gareth was apoplectic at the thought of Kiwisaver being introduced, but decided that if it was, he'd try to provide the 'least worst' of all the alternative.

by Bullitt | 15th Dec 10, 11:06pm 1292407589

Name one intelligent comentator who says Kiwisaver is good for the economy other than for one of two reasons:

It'll boost capital markets (Currently the government subsidy far exceeeds the total kiwisaver funds in NZ equitys and I see no chance of this changing except if all subsidies are removed and people are forced to continue putting money in in which case it will still take several years)

People arnt saving enough and need to be forced (ignores the point many people are already acting rationally, if you believe this do you also believe the government should force people to never drink alcohol or eat anything with over X calories or must exercise at least 2 hours a day - all could be argued to be good for people but not areas most people would agree with the government imposing on)

by Gummy Bear Hero | 15th Dec 10, 11:16pm 1292408193

Brian Gaynor .

by Ms de Meanour | 16th Dec 10, 1:15pm 1292458534

The problem with the libertarian case for leaving people to make their own mistakes is that many people are simply not competent to judge what's in their own best long term interest when it comes to financial management, and by the time they realise that they've got it wrong it is too late and the consequences are very serious.

You wouldn't expect people to make their own decisions about how best to treat themselves for pancreatic cancer or appendicitis, would you? Understanding about compound interest and assessing the relative risks of different forms of investment are equally beyond many people.

by Gummy Bear Hero | 16th Dec 10, 1:38pm 1292459908

As long as we maintain a gold-plated no-fault cradle-to-grave welfare state , people will see no necessity to educate themselves on how to conduct their financial affairs sensibly .

Look to the public school system and ask why financial literacy is not a core subject .

The NZ medical system operates on high standards . You can nearly 100 % trust the experts within that field ........... The financial industry in NZ is entirely different , with a history of shonky practises , woeful regulation , and collapses . The financial equivalent of getting your medical needs met by a side alley " clinic " somewhere obscure in India or Thailand .

by Ms de Meanour | 16th Dec 10, 2:57pm 1292464667

There's no doubt that it is desirable and necessary to regulate the provision of financial advice better. But the accusation of shonky practices and collapses hardly fits the default KiwiSaver providers, all of whom were chosen for their conservative low-risk approach.

There's no doubt that it is possible and desirable to get more people better able to manage their own financial affairs. But it's not an easy task to become an expert investor and it's not necessarily the best use of time and effort for everybody to try to do so; and the political reality is that no Government is ever going to be able to say to a 70-year old suffering from malnutrition and sleeping under a railway bridge, well tough, you should have saved more while you had the chance.

Surely a simple basic apporach has to be better than nothing for those who don't have the capability?

by JB | 16th Dec 10, 3:58pm 1292468282

if you believe this do you also believe the government should force people to never drink alcohol or eat anything with over X calories or must exercise at least 2 hours a day

Perhaps a more relevant comparison is the Government forces us to drive on the Left Hand side of the road for the greater good and we all prosper as a result.

Similarly with savings - individuals time spans are too short and retirement is not on anyone's mind when your 30 - but that's when it's critical to start - so this is an example of where and appropriate level of Government control / guidance is necessary.

If you look at Singapore, Chile and Australia you will see 3 of the most vibrant economies in the world and surprise surprise - they all have long running compulsory super schemes.

No one in these countries believe they would be better off without compulsory super - in fact in Oz they are debating raising it to I think 9 % company + 4 % individual

The other side of the balance sheet equation is that super savings provide the capital for national investments.

Just look at Aussie roading programs.

I'm a pragmatist - why don't we just do what we know works.

by Billy | 16th Dec 10, 10:20am 1292448043

http://www.nbr.co.nz/article/give-us-a-government-guarantee-say-kiwisav…

According to the survey 48% thought there's a government guarantee and 35% were unsure. Wonder how many joined due to misperception.

by Ms de Meanour | 16th Dec 10, 11:35am 1292452526

Many commentators seem to be criticising KiwiSaver for failing to do something that it was never intended to do.

Is it a better approach to personal financial management than investing it yourself in an intelligent and well informed way, ensuring a good level of diversification and taking account of all your individual personal circumstances, likely future developments and your own level of risk aversion - no, of course it is not.

Is it a better approach to personal financial management than squandering your spare cash on ephemeral stuff you don't need, on the assumption (if you are thinking about your old age at all) that the Government will always be there to look after you - yes, it is.

by AndyC | 16th Dec 10, 12:42pm 1292456520

@ Diana / Bernard / Others:

When kiwisaver was starting and they were asking for submissions/comments I requested the ability to have the investments spread across multiple providers across time, maybe limited to all current contributions going to a single current/live provider at a time.

I felt a single provider focuses rather than spreads the risk of a catestrophic provider failure (most likely through crummy investment decisions, ala ANZ / ING etc). And it also allows you to somewhat spread the investment to try and get the avg provider returns.

So as an example, what I mean is say in yr 1 put all kiwisaver into provider X, next year keep the contributed $ invested with X, but switch all new contributions to a new provider Y etc etc. Over time you could have the kiwisaver spread across many providers, although only ever 1 live provider with all current contributions going to that live provider.

Naturally if you want you could use a single provider at a time, switching the full balance when ever you switched providers. (ie the current situation re providers is possible)

The advice they gave me was that this is not an option they were considering.

From your travels, has there been any interest in something like this? Or is it unlikely to ever happen.

Does anyone have any thoughts on this?

Cheers

AndyC

by 28_29 yr old | 16th Dec 10, 2:03pm 1292461380

I'm all for Kiwisaver, but as people have pointed out it's not for everyone. We have been in KS since the beginning and put the kids in as well

I and my wife have $30K between us and my 3 young kids $10K between them

The start up and dollar for dollar for the adults is great and a good incentive

I also like the dripping money in every month and the exposure to Aussie and International shares.

Overall we have had good returns on average 9% per annum.

The kids will have $20-30K in when they are 18 and then they can get a part time job and have their house deposit when their 25. The sorted website reckons we adults will have somewhere between $200-400K at 65.

My provider also only charges 1%.

Regards

by Nicholas Arrand | 16th Dec 10, 2:07pm 1292461671

Save harder 28 y.o.! Trust me; as someone who sees the outgoings of 'retirement' today, $400k surplus each will be nowhere near enough by the time you are 65!

by shorts | 16th Dec 10, 2:25pm 1292462729

If he can only afford to save 2% of his income then I doubt he will be able to do any better. If he could save more then I assume he would in another form of investment. Why would you assume that people in Kiwisaver are only investing in Kiwisaver?

We have our Kiwisaver investment which will be somewhere between $200K and $400K (assuming nil to bare minimum returns, no salary increases and no change in legislation), but we also have our own home (mortgage free), shares, cash and a holding in a commercial building (returning 10% pa).

Factor in a 4 or 5% return on our kiwisaver and we would be looking at $600K. I know you will agrue that $600K won't be much once you take into account inflation, but then my contributions will also increase with inflation which would partly offset it.

I don't really agree with the concept as a whole, but if it's being offered and you can afford to part with $2K pa why not take it up?

by 28_29 yr old | 16th Dec 10, 2:57pm 1292464648

Thanks for your concern Nic. But with KS there is no point to put in >2% + 2%. It was great when it was 8% (4% + 4%).

I will have 5 properties paid off mortgage free and dragging in a small fortune every week when I'm 50-55 :)

by Nicholas Arrand | 16th Dec 10, 3:07pm 1292465252

I hope you are 28 y.o. That's what alternative investment stratgies are all about. If I had those same investment properties today, I'd be dragging in a 'fortune' of about $2250 ( based on average rents). Tax @, say, 25% = $1690. As I said, 'trust me' ~ that 's nowhere near enough!

by 28_29 yr old | 16th Dec 10, 3:20pm 1292466026

You sound like you life the high life if $1700 isn't enough to live on per week

I know a good budgeting service for you if you want? :)

by Nicholas Arrand | 16th Dec 10, 3:26pm 1292466388

Quick rule of thumb, 28 y.o. Look at what you earn now. Think of that not coming in any longer ~ but going out. You require twice what you earn, today, to pay for 'not working' today. Otherwise you just end up sitting in your house and not spending. I don't think that's what you have in mind for when you get to the end!

by 28_29 yr old | 16th Dec 10, 3:32pm 1292466754

I forgot that you rent the big flash houses Nic!!That must suck a bit out of the weekly budget

Read Martin Hawes Investing for 20 great summers this Xmas :)

I will be sitting in my modest mortgage free house with my grandkids and great grand kids having a great old time

by Nicholas Arrand | 16th Dec 10, 3:37pm 1292467064

Don't need to read Martin Hawes. I know him and Joan from my time in Queenstown!

by AndyC | 16th Dec 10, 2:20pm 1292462412

Overall we have had good returns on average 9% per annum.

That's pretty good return 28_29. Mind telling us who you are with, and the name / risk_type of fund?

by 28_29 yr old | 16th Dec 10, 3:00pm 1292464847

Growth fund (55% overseas equities), iwon't say who they are but I will say they are advertised/listed on interest.co.nz ;)

by Gareth Vaughan | 16th Dec 10, 3:37pm 1292467069

FYI, Alex's story today on the Savings Working Group floating the possibility of "auto enrollment" for KiwiSaver - http://www.interest.co.nz/news/savings-working-group-looks-auto-enrollm…

by FCM | 16th Dec 10, 3:58pm 1292468339

Well I been in K/S since it started, and my Wife has a dollar for dollar one at her work (not K/S), which she can take out after 7 years (so pumping as much as we can into this) and we use K/S as our RETIREMENT account. We also have a house/mortgage and three kids. K/S is needed as in the real world things come up etc and it is better to have your money locked away where you can not touch it until retirement (outof site out of mind) we budget not taking this into account and it works. I was always told form very young age..DO Not expect any payouts from government when I reach retirement unless you save yourself, I have quite a few years left..but fully belive that by time I reach 67 (as it will raise) that unless you have saved, got your own house then don't expect jack all at 67. Also set the three kids up.

by Wolly | 16th Dec 10, 5:18pm 1292473080

And that's all good and dandy FCM...what do you say to bum next door who will collect a pension because he or she didn't save a dam thing... but blew the lot on booze fags gambling and cars?

by Steptoe | 16th Dec 10, 5:05pm 1292472308

For the greater portion of the NZ population for who saving for retirement is a concept that cant be grasped and/or who have no discipline to be able to save and.or have very little or no financial /investing concepts......

Kiwi Save is great

For those who do have such suss .financial security, or havnt invested a a coal mines or speculative houses in recent yrs, and are 100% confident Will not see or be effected by another down turn in their life time...dont need it....

Then there is the other person, like the above, who does have a bit of suss, and uses kiwi save to hedge just in case Murphy pokes his head into the picture.

But bottom line....we all agree that this country cant afford super further down the line right?

We all agree we have to take personal responsibility.

And the whole basic thing revolves around a substantial proportion of the population not taking personal responsibility either because of lack of funds, education or a dont care attitude.

Hence the existence of kiwi saver.

Its not a matter of pros and cons, for and against, its a matter of neccessity....and the good part is it is still a personal choice.

If the Douglas super (compulsory) had not been used as an election bribe, we would be sitting pretty today...about the only thing Douglas did that was positive.