KEY POINTS:
With just two weeks to go until the Kiwisaver scheme kicks off, an economist is warning there are sharks in the water.
Gareth Morgan is concerned people are too trusting of the savings industry and said they should look at the way it has behaved overseas before deciding which company to invest their money with.
He said savings companies have worked out lots of ways of clipping the client's ticket and go out of their way to disguise what fees and charges they are really taking.
"The reality of the fund management industry, is that in any one year, only 30 per cent of fund managers actually match the market average return."
Mr Morgan said investors often only see about 40 per cent of the profit that has been made on their investment, with the rest ending up in the pockets of what he calls "helpers".
He said many people are disappointed by the returns such schemes offer at the end of 20 or 30 years.
Mr Morgan believes the industry is not transparent enough with fund manager often not only charging fees but adding on unlimited expenses.
Mr Morgan said regulators have not got a hope keeping tabs on the savings industry because they are under-resourced and depend on a code of ethics but the track record of such companies is abysmal.
He questions how Kiwisaver can be protected against changes in regime and the lobbying efforts of the insurance industry which will try to get things working to their advantage. He believes Kiwisaver's safeguards are inadequate and wants the government to strengthen the regulations.
Mr Morgan said people must be be careful before committing their savings to Kiwisaver, as once the money is in a scheme it is locked up until they are aged 65.
- NEWSTALK ZB
