2 Comments 2 Commentsby Eric Frykberg
A man who moved from political upheaval to oversight of the financial sector has died at the age of 67.
Peter Neilson had been a cabinet minister under David Lange in the 1980s. He later held several leadership roles in the financial sector before becoming chief executive of the Financial Services Council (FSC) from 2011 til 2016.
The council oversees 99 organisations in the insurance, fund management and financial advice sector, with a total sum of $95 billion in funds under management.
Neilson took over at a time of crisis for the industry, when confidence in the financial sector was very low.
Its current CEO, Richard Klipin, paid tribute to his predecessor.
“He was an ambassador for the sector, and contributed significantly to the development of policies and guidelines around the industry,” Klipin said.
Neilson came into the job as head of the Investment Savings and Insurance Association (ISI) which changed within a year to the Financial Services Council (FSC).
By its own admission, ISI members agreed that change was needed, and that the public had lost confidence in the financial services sector.
This was in the aftermath of the Global Financial Crisis, when several finance companies collapsed, such as Hanover, bringing big losses to thousands of ordinary New Zealanders.
From the beginning, Neilson was outspoken, declaring that the FSC “must be consulted” by politicians before any changes were made in the financial sector. He was also concerned about “inadequate insurance”, which he called a major threat to the resilience of New Zealand.
Two years later he took on flaws in KiwiSaver, saying around a million people were on a contribution holiday or were irregular contributors. He then went on to accuse the Government of procrastination in ensuring that people had enough money to survive in their retirement. To fix this, he called for a gradual increase in KiwiSaver contribution levels to 7%.
Current rates vary from a default rate of 3% up to 10%.
Neilson also charged the Government with imposing “the most hostile tax environment for long term savings in financial products ….. that we can find anywhere in the world.”
He said the net effect of this was to reduce the size of a retirement nest egg by 50% over 40 years, and he cited an FSC survey.
“Only 8% of New Zealanders told us in an independent poll that they could survive on NZ Super alone – could you live on $357 a week?”
Three years later, Neilson resigned from his job. At the time, the FSC chairman Rob Flannagan told Good Returns: "The FSC Board is reviewing how the KiwiSaver and personal risk (life, income protection and credit insurance) industries will pursue their collective interests. While this is underway, the FSC will not be needing a full time CEO.”
Flanagan said he and Neilson parted on good terms, and he thanked him for his work. In fact the departure was probably due to a critical report on insurance industry commissions, which caused several organisations to quit the FSC.
Good Returns quoted Neilson as saying it had been hard to balance the increasingly diverse interests of FSC members.
"Twenty years ago, everyone wanted to be a financial services supermarket. Now they want to be niche and it's more difficult to find common interests."
Neilson had earlier been an MP and was a cabinet minister in the Fourth Labour Government. This Government famously pushed through neoliberal reforms, driven by three powerful ministers, Roger Douglas, Richard Prebble and David Caygill. Neilson formed a defensive outer ring around these three men, along with David Butcher and Michael Bassett.
Collectively, they transformed the New Zealand economy. Butcher says Neilson's biggest contribution was in pushing for an independent central bank, which helped curb inflation far better in New Zealand than it was done overseas.
“Ronald Reagan tried to tame inflation, and Margaret Thatcher did, and both of them used Milton Friedman's idea of a fixed rate of annual growth in the money supply. They both tried it and they both failed.”
Butcher said the problem was that the speed of growth in the supply of money was very hard to measure. But assessing actual price rises was far clearer.
And the best way to do this was to get the Reserve Bank to watch prices carefully, make it independent of political meddling and mandate control of inflation as a condition of the Governor of the bank keeping his job.
“The Reserve Bank should focus on price levels, and if prices are increasing fast, the Reserve Bank would increase interest rates,” Butcher said.
“That was the Adam Smith idea, it goes back that far. But what Neilson did, which was unique, was that he took it away from political control and had the Reserve Bank responsible for maintaining price increases of between 0% and 2%.
“If the Governor of the Reserve Bank did not achieve that, he would be fired.”
Butcher says this system was adopted overseas and has been in place in New Zealand for 30 years.
Neilson was born in England of a New Zealand father and grew up in this country.
His employment since leaving politics in 1990 included work with ACC, the Trustee Savings Banks, and the Council for Sustainable Business Development, as well as the FSC.
A big interest for him was horse breeding.
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