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KiwiSaver and the c-word

In the wake of signals from Labour leader Phil Goff that the opposition may campaign for KiwiSaver compulsion, Institute of Financial Advisers (IFA) chief executive Peter Lee said forcing savers into the scheme wouldn’t benefit advisers – at least in the short term.

Wednesday, September 28th 2011, 6:58AM 5 Comments

by Benn Bathgate

KiwiSaver compulsion won’t necessarily benefit advisers and even fund managers are divided as to its benefits.

“I don’t necessarily think it’s going to make any difference, certainly not in terms of the average adviser, because given there’s 1.8 million people already in there, the people who aren’t already in probably aren’t either earning a lot, aren’t interested, have opted out, chosen not to be part of it or don’t understand the message,” he said.

Lee said an increased savings pool – and a wider range of fund options and specialisations – could in the long term benefit advisers, but he saw no adviser advantage to compulsion in the short to medium term.
“Because the nature of the people who aren’t already in there are not exactly the target market of your typical adviser.”
Professional Advisers Association (PAA) chief executive Edward Richards agreed that measures to encourage KiwiSaver take-up were commendable, but that other options existed.

While both Lee and Edwards were unified in their view compulsion wouldn’t necessarily benefit advisers, two KiwiSaver fund managers KiwiSaver Good Returns spoke to had differing views on the issue.

Gareth Morgan Investments chief executive Cathy Magiannis said, “I not sure that we’ve actually gone through the pros and cons, I don’t think we’ve yet debated that process and come up with an overall view.”

She admitted that from a providers point of view, compulsion could result in more business, though from a customer point of view it may not be the best option.

“Savings is very personal, and it’s about the individual wanting to do it, enforcing a way of thinking doesn’t necessarily get the correct end result,” she said.

“Thinking about it from a customer perspective, even as a provider, we’re here to service customers, we don’t want them to be in a scheme they don’t want to be in.”

Tower Investments chief executive Sam Stubbs, however, is an enthusiastic supporter of compulsion, saying Tower had been calling for such a change for a long time.

“It ultimately reflects the economic reality, we’ve got to become a savings culture, KiwiSaver seems to have been a very successful way of achieving that.”

Stubbs also dismissed criticism that KiwiSaver compulsion could divert money from other savings or investment schemes.

“It’s not as if diverting savings means you’re diverting it from something better to something worse, in fact the performance of KiwiSaver funds indicates you’re probably diverting it to something better.”

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

« Outage ousts FSPR from web KiwiSaver mismatch a 'huge challenge' for advisers »

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Comments from our readers

On 28 September 2011 at 9:18 am Independent Observer said:
It’s a relatively simple argument: you either spend or save money - with New Zealanders currently having a preference for the latter.

Compulsory savings not only delivers positive long term social consequences, it underpins both capital markets and the financial services industry.
On 28 September 2011 at 10:08 am btw said:
I disagree - because its compulsory and exclusionary I think it detracts from an efficient and accountable capital markets system. In other words, the selected pigs at the trough will just continue feeding, with the better options being undermined by the cowboys and the systemic inefficiences that will develop. The only thing keeping some balance at the moment is that investors can vote with their feet. Take that away and we have nothing.
On 28 September 2011 at 10:24 am Kimble said:
If you think NZers arent saving enough, then the best course of action would be to address the reasons for that preference, wouldnt it? How can it be wise to ignore those reasons in favour of using a blunt tool like compulsion?

And forgive me if I am underwhelmed by the protectionist argument that compulsory savings "underpins" the financial services industry.
On 28 September 2011 at 11:42 am Dirty Harry said:
isn't the Cullen Fund compulsion? KS doesn't need to be compulsory, esp. with the kick-start and housing subsidies being expensive bribes which have worked far better (and proved much more costly) than any pointy-head ever guessed.

Ironic that two govts have talked about our obsession with property yet we still have welcome loans and KS housing subsidies.

Compulsion will be too unpopular with too many swing voters, and a regulatory nightmare. So my pick is the lowered MTC stays, the kicker and the housing subsidies disappear and the NZ super contributions ($2 billion a year?) resume. In 2014.

On 28 September 2011 at 4:42 pm Amused said:
In these difficult financial times when most families are struggling just to meet their day to day living costs making Kiwisaver compulsory seems ill advised. I agree that most people should be saving something every fortnight towards their retirement but the reality is most simply have nothing left over. Taking it out of their pay packet before they can spend it will just see more people having to rely on Working for Families etc which means the whole concept of complusory savings becomes self defeating. It will end up costing the country more than it will save us.

We can all debate the reasons for people having an inability to save i.e. poor lifestyle choices etc etc but the reality is that many New Zealanders as a whole need to start showing some person responsibility for a change and stop relying on the Government (taxpayer) every time they have another child they can’t afford. No doubt though some apologist on the left will leap to a person’s defence to have 5 children on a household income of only $45,000 p.a. Sigh... Until we change the mindset of many Kiwi’s towards what are and aren’t good financial choices having compulsion in superannuation will not change/fix anything.
Commenting is closed

 

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