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Proposed changes to KiwiSaver in the National Party's election 2023 manifesto

KiwiSaver has been a huge success story in New Zealand since it's launch on the 1st July 2007. People have money set aside for their retirement, they have learned about investing in financial assets (as compared to the traditional residential investment property investment).

With the billions of dollars invested in KiwiSaver, yes there are a number of fund managers who have a profitable business from operating KiwiSaver and there are now 38 schemes available (often with multiple funds that people can invest in within each scheme.)

When KiwiSaver was launched, one of the things that excited us was the extremely sensible requirement that each person could only have 1 KiwiSaver provider.  We had spent much time chasing around to find clients multiple Australian or UK superannuation funds, often to find that the fees and insurance premiums (in Australia) had reduced the amount of money in their scheme.

By having one KiwiSaver provider, people can quickly and easily find out what their balance is, what their risk profile is, and move their KiwiSaver if they want to.  It is easy to move your KiwiSaver if your fund manager isn't performing or doesn't match your values and ethical profile.

The system works well with the involvement of IRD and the identification of people by their IRD number (as well as their individual KiwiSaver number).

The financial literacy of New Zealanders is not high (which is one reason that we commit to publishing our blog articles and newsletters every month to help increase that literacy), and many people still don't understand the basics of KiwiSaver as it stands today.  Fortunately there are some excellent commentators in the market (eg Frances Cook), who are helping people to understand.  KiwiSaver providers are also legislatively required to educate and try and engage with clients.

We send our non Membership Fee KiwiSaver clients a hard copy mailer every few years to try and get them to engage.  Although it is thoughtfully designed to get their attention, we rarely hear from more than 3% of people.

So, we can't understand the value to KiwiSaver members of National's proposal to change KiwiSaver and let people split their KiwiSaver over multiple providers.  Although their announcement has been tweaked to apply to 'sophisticated investors', there is already the ability for people to do this through several providers, if that is what is important to them.

We are concerned that (in addition to creating significant administrative complexity - imagine processing a financial hardship withdrawal, which requires the trustee to make a decision, if you have two or even three KiwiSaver providers), this would open the door to the equivalent of the Australian SMSF arrangements.

Australians Self Managed Super Funds (SMSF) allows people to put their residential properties and business into their super and have that count for super.  Remember, that Superannuation is compulsory in Australia. We have seen first hand how that can destroy peoples wealth, through being 'sold' property investment schemes and high fee SMSF arrangements, where the 'adviser' ends up with tens of thousands in fees and the clients with virtually no super, having to start again from scratch in their 50's to build up their superannuation assets.

One of the proposed benefits of this KiwiSaver splitting is to 'drive down fees'.  But... KiwiSaver fees have been continually falling.  A number of KiwiSaver fund managers have scrapped their monthly administration fees, and the total cost ratios (fees to KiwiSaver members) of KiwiSaver providers have fallen over the last decade from an average of about 1.30% in 2013 to under 0.80% now.)

In summary, we think this is not a good idea, will over complicate KiwiSaver and confuse people, particularly where financial literacy is not high.

We say to ALL politicians 'KiwiSaver is working well to ensure that people have savings for their retirement... Leave it alone!'


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