No implicit Govt guarantee with public KiwiSaver

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There would be no implicit Government guarantee with a public KiwiSaver fund, the Green Party says.

Tuesday, November 8th 2011, 5:13PM

"Our proposal to offer a public KiwiSaver fund to lower costs and fees does not come with any Government guarantee," Green Party Co-leader Russel Norman said.

"If any KiwiSaver provider went broke, the Government may have to respond as National did when AMI got into trouble. Our public KiwiSaver fund would have no more implicit guarantee than any other provider.

"What I can guarantee is that by reducing KiwiSaver fees and costs significantly, New Zealander's nest eggs will grow considerably."

Australia's fee-cutting superannuation reforms announced in September will increase savers' nest eggs by A$150,000 for a 30 year-old worker earning an average full-time wage.

"The Australian Government is enhancing the savings of Australians significantly through economies of scale. Why wouldn't we do the same for KiwiSavers here?".

"A public KiwiSaver fund is a better option to help 1.8 million New Zealanders saving for their retirement than selling state assets to the few who can afford to invest in them."

The Green Party will create a public KiwiSaver fund to lower costs and boost people's nest egg on retirement. To achieve the necessary economies of scale to achieve this, the fund will be managed by the Guardians of the New Zealand Superannuation Fund - a $16 billion fund. The front-end provider could be Kiwibank or the Inland Revenue Department, as recommended by the Government-appointed Savings Working Group, depending on who can do it most efficiently.

"The best way to ensure KiwiSaver providers don't get in to a situation where they're too big to fail is to regulate the industry well," Norman said.

"Without good prudential oversight and reporting, we could end up with another AMI situation where the Government has little choice but to bail out poorly regulated KiwiSaver providers.

"One of the first tasks of the new Financial Markets Authority (FMA) will be to ensure KiwiSaver providers are reporting their fee and cost structures in a fully consistent and transparent way.

"The FMA can also issue clear parameters for performance-based fees, such as ensuring they're measured on an after-tax after-cost basis, and include clawback provisions to recoup poor performance."

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