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KiwiSaver sector slams National proposal

New Zealand’s KiwiSaver sector has panned a proposal from National to allow unemployed people to tap into their accounts to start a business.

Wednesday, July 29th 2020, 9:39PM 4 Comments

Rupert Carlyon

National leader Judith Collins revealed the plan on Wednesday.

The scheme would give people a $1,000 voucher to get advice from a chartered accountant or “registered financial adviser” to talk about their ideas, put together a viable business plan and set up on a system such as Xero.

At that point they would then be eligible to withdraw up to $20,000 from their KiwiSaver account to get the business off the ground.

Milford Asset Management’s head of wealth management Murray Harris said part of the reason KiwiSaver had been so successful was that it was disciplined and clearly intended for retirement savings.

“We need to stop thinking of it as a honey pot that we can dip into for a rainy day or when things go wrong.”

Changes to KiwiSaver risked shaking people’s confidence in the scheme, he said. “The more people talk about KiwiSaver and making changes to it the less confidence people have. They’re worried there will be more change and they won’t be able to access their money.”

There would also be questions of who would decide what was a viable business opportunity, he said. It was unlikely to be something supervisors would want to be tasked with.

Australia has allowed people to dip into their superannuation savings and 3.5 million people had done so. Harris said data there had shown 65% of that money had gone on discretionary spending.

He said withdrawing money could have a significant impact on the final outcome at retirement, which could run into hundreds of thousands of dollars for younger people.

Harris said the idea of a $1,000 voucher for advice was good but it could be made available to help people get KiwiSaver advice.

Adviser Clive Fernandes said it was a terrible idea – he said $20,000 would no be sufficient to get a business off the ground and most people would end up worse off than they started. “It’s a recipe for failure.”

“I support the concept of encouraging people to start a business but I don’t think this is the way to go about it.”

He agreed with Harris that such a change would make people wonder what else the Government might change.

Rupert Carlyon, founder and managing director of KiwiSaver fund provider kōura, told media he thought is was a bad idea and “kind of scary”.

“I think it’s nuts,” Carlyon said.

KiwiSaver was supposed to be a safe and secure back up plan for retirement, he said.

“I’d like Rupert to tell New Zealanders why they shouldn’t use their own money to invest in their own business,” Collins said.

“Rupert is only the first fee-charging funds manager to tell Kiwis who intend starting a new business that he knows how to invest their money better than they do.”

Tags: KiwiSaver Kōura Wealth Milford Asset Management

« 'Retirees' stick with KiwiSaver, AMP saysTreasury, MBIE mull options for KiwiSaver default scheme »

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Comments from our readers

On 30 July 2020 at 3:09 pm Murray Weatherston said:
While I understand why product providers would be opposed to allowing anybody to withdraw from Kiwisaver early (conflict of interest anyone?), I am surprised so many advisers are also opposed (except for similar COI reasons).
Politicians have already decided that Kiwisaver is not a pure retirement savings product with their decisions to allow early withdrawal for hardship and for first home ownership.
National are saying - here's another reason - to allow people to set up their own business. If they are successful in that business, then surely they are going to be better off in the longer term.
Opponents will point out that a lot of businesses fail - but are they saying all businesses will fail - and if not do the have the omniscience to know which ones will fail and which ones won't.
I was one of the few advisers to support a limited COVID withdrawal option a la Australia (I see Treasury has increased its estimate of withdrawals to $42 billion, which shows people left to their own decision thought that a few extra dollars to get them through the short term was/is a good idea.
No point going hungry now so you can have both jam and cream on your scones in 30 year's time.
On 30 July 2020 at 10:38 pm gavin austin adviser business compliance said:
Wow Murray you are in great form today - agree whole heartedly - can't say anymore except who are these "advisers" - one that was quoted Clive Fernandes - see his Linkedin profile - CoI ??
On 31 July 2020 at 11:14 am Davidvs said:
There's a lot more logic to people accessing their own savings than asking for more Government handouts. KiwiSaver balances are owned by each member. Totally agree with the points being raised by Murray. I'd expect the bulk of those that access their KS savings for building a business will take better care with those funds than the not inconsiderable percentage of KiwiSaver funds who are unable to beat their own performance benchmarks.
On 31 July 2020 at 11:51 am Amused said:
I'm with you Murray. We’ve already allowed first home buyers to drain their entire Kiwisaver balance save for the initial Govt contribution so they can enter the housing market (says a lot about housing affordability in New Zealand) so why are we worried now about someone accessing a very small portion of their superannuation money early to start a business which may well prove with hindsight a great financial decision. I agree that the arguments against this seem to have a smell of conflict of interest to them.

National also need to follow up this proposal with a pledge to slash small business compliance costs i.e. health and safety this been the biggest farce of an industry ever conceived by man. Unfortunately with this current lot in power unless we get a change of Government compliance and regulation costs are only going to increase.

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