The main thing is, members’ contributions need to initially go to one, not multiple providers.
National wants to give KiwiSaver members more choice, which it believes would drive innovation, competition, and lower fees.
While some of those the Herald spoke to could see merit in the concept, they worried changing the rules would create complexity, and therefore cost.
Fundamentally, they also questioned whether there was a need for change, given there’s room within the existing law for providers to innovate to cater to engaged investors seeking greater diversity.
For example, Sharesies is working on a KiwiSaver offering, which would allow members to allocate a portion of their portfolios towards individual company shares and exchange-traded funds (ETFs).
Milford head of KiwiSaver and distribution Murray Harris recognised the options already available in the market and asked the question: “What is the problem it [National] is trying to fix?”
Harris said KiwiSaver members often struggled to choose between the handful of funds offered by a single provider, let alone funds offered by other providers too.
He believed they would need financial advice if presented with too many options.
Furthermore, Harris said it would be harder for members to measure how their retirement savings were tracking if they had to check in with a few providers.
Simplicity co-founder Sam Stubbs believed giving members more choice was a good thing in principle.
But he feared the additional administration required could push up costs, which would ultimately be borne by members.
Some of the administrative burden would fall on providers, and some would fall on Inland Revenue, which collects members’ contributions from their employers before passing them on to their KiwiSaver providers.
Stubbs appreciated the argument National’s Commerce and Consumer Affairs spokesman Andrew Bayly made, that giving members more options would spur innovation.
Bayly noted members might be more inclined to look at alternative asset classes, like start-ups or build-to-rent housing, if they had the option of only making a small investment in these areas.
Indeed, Stubbs was open to creating more specialised funds if KiwiSaver members had the option of diversifying their investments more.
He said data sharing between providers might be required to enable members to easily track how their investments were going in totality.
Massey University Business School associate professor Claire Matthews was “disappointed” National wanted to fiddle with KiwiSaver in a way that “doesn’t make a useful contribution”.
She cited similar concerns to those expressed by Stubbs and Harris around complexity, administrative costs, and the fact there are already ways members can achieve diversity.
Matthews didn’t buy the argument that limiting the number of providers someone could invest through would alleviate the administrative burden. Indeed, if the limit was set at two or three providers, members might push for more options.
She said KiwiSaver was meant to be simple and low-cost.
OliverShaw tax advisory director and former Inland Revenue deputy commissioner of policy, Robin Oliver, believed diversity was a good investment principle.
His concern with National’s proposal was around policing whether members contributed enough to receive the government contribution.
The Government encourages contributions by paying members $521.43 a year if they contributed at least $1042.86 over the year.
Oliver worried it may be tricky for Inland Revenue to check in with various providers to see if members made sufficient contributions to qualify for the government payment.
Coming back to Harris from Milford, he didn’t want to see politicians tinkering with the KiwiSaver scheme, saying it should firmly remain a vehicle for retirement savings.
National, in July, also said that if elected to govern, it would allow people under the age of 30 to draw down on their KiwiSaver savings to help cover their bond payments for tenancy agreements.
“Getting together up to four weeks’ rent in advance for a tenancy agreement is not easy for many people, particularly for students and young graduates, who don’t have a lot of cash,” the party’s Housing spokesman Chris Bishop said.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
