The Green Party has proposed KiwiSavers could use the NZ Superannuation Fund to manage their funds, potentially saving them tens of thousands of dollars in fees over the life of their savings.
This 'public option' for KiwiSaver involves the NZ Superannuation Fund managing the funds, while either Kiwibank or the Inland Revenue Department would manage the administration at the 'front end.'
“A significant part of New Zealanders’ savings get eaten away by costs and fees. By offering a public KiwiSaver option, we can lower costs sizably, saving tens of thousands of dollars,” Green Party Co-leader Russel Norman said.
“If these savings are reinvested, KiwiSavers’ nest eggs will be significantly higher, up to $142,000 higher in some cases ($64,000 in today’s dollars)," Norman said.
“We will do for superannuation, what Kiwibank has done for banking."
Norman said this 'public option' could achieve significant fee and cost reductions through greater economies of scale.
The Government-appointed Savings Working Group recommended a single default provider in January. The Australian Government announced similar but more sweeping changes to their superannuation industry in September this year, the Green Party said.
The Savings Working Group estimated that a single large provider could reduce the costs of KiwiSaver by a factor of two-to-three, the Greens said. A 40 percent saving in costs and fees over the lifetime of a typical KiwiSaver account will result in a bigger nest egg on retirement of anywhere from $23,000 to $142,000, it said.
“A public KiwiSaver option will intensify competition in the superannuation industry, driving down costs.” Norman said.
“Like Kiwibank, the public fund will be New Zealand owned, managed in an arms-length, commercial way, in the interests of the New Zealand economy.”
51 Comments
YES , what a brilliant idea , the Govt Super can be the default provider . This works in places like Singapore , where people can either elect to have the Singapore Compulsory super managed by a Private set-up or the State set-up . I am sure there are other countires where it works.
YES, over time 40% of all superannuation funds in AU have become SMSF's (Self Managed Super Fund) or (DIY Super) as people became disillusioned with the poor performance and level of fees extracted by the main retail providers. ATO (IRD) manages the oversight and requires an annual audit to be submitted (makes it expensive) but if you have a lot of money in it the cost becomes less significant and less than the Retail Providers fees. Search on SMSF super.
National best watch out for the Greens.... they are starting to get some real traction. Some of their stuff is a bit wishy washy, however they have a widening appeal that crosses the political spectrum. National does itself no favours with its mine it or tarseal approach to solving problems.
I don't think you meant it (or did you?), but your desription of NZ would have a great appeal to those living a life of drudgery in many countries around the world.
That aside, the greens are picking up votes from main stream left right and centre. The question you need to be asking is why is this happening?
I believe the Nats need to recognise that the greens are hitting a cord and start responding (things like cutting field staff at DOC is one of the silliest things that has happened under their watch). It may not bury them in this election, but failing to respond to the green issues will eventually cost them dearly.
The Nats are operating more like a Govt that has run out of ideas, they are uninspriring.....
Western lifestyle? like the 20 to 30 years they will shortly be spending paying off their massive debt.....some lifestyle...they wont have any.
Or the fact that most western lifestyles are based on cheap fossil fuel that will be no longer cheap and rationed.....probably by price.....pile that on the debt repayments.
Both the above brought to you by right wing / laisezz fair politics.....
I think on balance I'll vote green.....I dont vote for stupidity and greed.
regards
Greens main issue is they still have some absolutely ludicrous c**p to go with some otherwise reasonable policy.
That their official position is to cull 20% of the dairy and sheep stock of the country should be enough to condemn them by itself.
However I wish they wouldn't make a reasonable proposition sound bad by including the KiwiBank references - definately don't want my super managed by a bank that makes a $40 mill loss per annum.
Kiwibank is profitable. Keep up with the play
http://www.kiwibank.co.nz/about-us/news-room/show-news.asp?story=172
P.S. If you're trying to keep up with the play you might notice that the forgone Agnecy services fee is bigger than the loss that NZ Post made this year which prompted it to close a bunch of branches. So yes - the Kiwibank experiment is to blame for remote communities no longer having postal services. Bravo :-/
Hi Karll, can you please provide references?
Reading financial statements is not my forte, but you might find it in here http://img.scoop.co.nz/media/pdfs/1108/GDS_Jun_11_FINAL.pdf
Thanks Merge - Page number 32 - the two lines:
Payment services fee income (related party) &
Payment services other fee income
These are the Agency Fees & Western Union transfer fee revenue lines that already existed as part of NZ Post but were transferred into KiwiBank on its formation.
and it provides a service....so it gets an income....now I can see you saying that some parts of its business lose money and some gain it, sure.....but most businesses of any size are in the same boat. Also if those services/fees were taken out they would be provided by someone else so a gain for someone else....if that costs more then it make no sense.
regards
Ummm - no Steven not what I was saying at all.
I'm saying that those services and revenue were being provided by NZ Post for years before the creation of KiwiBank. Moving those services into Kiwibank is a fudge to cover up the fact that the actual new operation is receiving a massive year on year subsidy from NZ Post (who could have just held onto that revenue given it's still their staff and shop...)
Well we can disagree.....NZ post has chosen to out source that service to kiwibank...Kiwibank provides a range of services and gets paid for it. Now I would be interested if that is a subsidy ie Post is paying more to kiwibank than is a fair price than if it went say to a 3rd party....that is then clearly a subsidy......Otherwise NZ post has chosen to brake up its subsidaries in a logical manner, ie that suit it.
regards
Thats the point - NZ Post has transferred the ENTIRE REVENUE to KiwiBank. It hasn't outsourced it - that would imply it pays Kiwibank but still gets the profit back.
Thats why the NBR noticed the issue back in 2004 - because suddenly NZ Post had a gaping $60 million hole in its accounts it didn't have before.
And if you are looking at whether a project is profitable or not you have to compare against it not being run - in this case NZ Post would still have that revenue. It wasn't and isn't created by KiwiBank so to include it as part of the profit of Kiwibank is completely fallacious.
Hey karl, I suggest you go book a scenic flight across the Wanganui River/Taranaki backcoutry . While your'e at it zip over to the east coast Gisborne and you observe the ungodly mess of slipes and erosions. If you aint noticed, the Wanganui and Ohura rivers flow mud, as does much of Gisborne and the East Coast (though I dont know this area so well).
Much of this got cleared due to Muldoons livestock incentive schemes.. It can't even hold pine trees beyond 5 or so years as the roots cannot penetrate the pappa country (unlike natives which fan out).
Eventually this country will be comepletely bare, stripped down to undelying rock and unable to even hold a gorse bush - this is sort of country the greens are referring to. I imagine parts of the South Island HC are the same.... and i won't even go near the overstocking of Waikato and Southland dairy country.
Thanks Rastus -
If this was what they were proposing it would hold some merit and I'd support some kind of concerted rehabilitation of this land. Bare land of that type is surprisingly good for the flora and fauna restoration work which I'm involved with because it is much easier to deal with any existing predator problems.
But sadly no - its a simple numbers gambit that they want to hammer down the greenhouse emissions. There is no plan that it should be in particular areas or any actual conservation oriented position like that. Which is the main reason I hate the Greens with a passion - they capture many people who think they are doing good for the environment while the party continues to be primarily driven by its socialist and communist members, and not any environmentalist with a clue. Which just serves to make them dangerous, rather than a force for positive change like the German green party has become.
Yes the type of peson they attract and some of the undelying agenda's at play are a worry. However, the campaign being run by the Green's keeps these undelying agenda's (or whatever we may call them) away from Joe Public. And deserved or not, the Nats now have the tagg as the least environmentally concerned political party of the lot.
The Nats would be well advsied to rid themsleves of this image by showing some leadership in environmental issues. They come across as the enemy of the environment - and it they haven't noticed, most kiwi's are pretty worried about enviro issues ...it's part of our brand afterall.
Yes - but the answer there is to have a proper water rights scheme that would both end up assuring better water quality, and removal of unsustainable farms.
Not just lets cull a random 20% of herd numbers somewhere cos they fart alot (which is the Green position).
URL to the "a random 20%" please.
A brief google shows no obvious link/piece.
This piece?
"The Green Party this week further raised farmers' hackles when it unveiled its recipe for reducing our greenhouse gas emissions excess ahead of next week's Government announcement of a target figure. The Green Party reckons we could shave 36 million tonnes off our emissions and thereby hugely reduce our obligation to buy carbon credits at enormous cost. It found potential savings in agriculture of 2.7 million tonnes by 2020 if dairy farmers reduce the number of stock they run from an average 2.8 cows per hectare to 2.3. On sheep, beef and deer farms, management tools such as diet changes and better soil drainage could reduce nitrous oxide and save another half a million tonnes, said the Greens."
http://www.nzherald.co.nz/landcare-research-ltd/news/article.cfm?o_id=3…
If so its not really "random"......
regards
Sorry - I mispoke; I should have gone with an across the board 20% cull, rather than "random".
However it is still an across the board reduction that is sought - not a look at where does dairy make sense or where is it a historical anomoly that is unsuited to its actual environment.
Kind of agreed - except that it is in the Green policy docs that the herd reduction <i>is</i> how they plan to reach the emissions target
http://www.greens.org.nz/sites/default/files/BigAffordableClimateChange.pdf
The Greens have said that some farms in the Waituna catchment need to be taken out of dairy - and the farmers should be compensated for it too, according to Russell Norman.
Guess whose going to pay? That's right, you the taxpayer. As a farmer I am happy to recieve compensation, but are you, as a taxpayer, happy to pay me?
There are fewer dairy farms than sheep farms however alot of those sheep farms are grazing dairy heifers in intensive grazing systems. But not a word on what should be done to them.
CO - the taxpayer already pays – but mostly because of ignorant farmers operating irresponsible against nature - so expensive studies need to be conducted:
Yes – and when do we see farmers to be penalised and not the taxpayer – paying back what they destroyed and still are. All what we see are costly bureaucracy procedures in the billions and no real progress. The Kaikoura district isn’t the only one where stock still have easy access to waterways. I think the NZpublic is sick of the government not to take real actions.
I think blaming the “Greens” is just ugly political propaganda.
http://www.radiolive.co.nz/Dirty-waterways-damaging-our-reputation/tabi…
... no - we are not Paul Henry.
Rather than spending all that extra public money on being a provider so that the public can, er, save money (?) - couldn't the Govt/FMA flex their muscles on the "reasonable fees" part of the KiwiSaver legislation?
If there was a clear definition of what "reasonable" is, then the providers that charge too much would have to cut their cloth. Or stop being a provider. Lower fees for the public, no cost to Govt.
It does not matter what the fees are. The thing that matters is what the long term after fee return is. Obviously if you can get good performance and low fees that is a good thing but focussing on fees only misses half the point. A very low cost manager wont be able to do much more than buy government stock on behalf of investors. Might suit the Greens as it would provide them with a steady flow of captive cash to do dopy things with.
Norman also seems to assume you can manage money with no costs. The providers we have now wont have made much money so far because of their set up costs and the first year or two when they had all the infrastructure to handle hundreds of thousands of accounts but only a few dollars in each account. They will be starting to do OK now as uneconomic managers are absorbed by the bigger ones.
Kiwibank dont have a wealth management unit at all and the Super Fund is probably perfectly happy with its one client. It has no way of dealing with a million customers. And just exactly what has Kiwibank done for banking? Certainly does not seem to have worked as a brake on bank profitability in NZ.
"Certainly does not seem to have worked as a brake on bank profitability in NZ." you need to consider what the costs would be if there wasnt a kiwibank. I moved 8 years ago and the mortgage rate has pretty much always been 25basis points or so lower....it has saved me money.....ditto bank fees....I rarely pay more than $4 a month...arguably then kiwibank has had a good impact.
regards
<i>the mortgage rate has pretty much always been 25basis points or so lower</i>
You sure? Generally either HSBC or TSB has had the lowest rate between them for at least the last 6 years. Also you are ignoring that over that period interest rate margins tightened across both NZ and Australia (and I'm pretty sure Kiwibank wasn't making a big splash in Aussie).
You pay $4 a month? Man you really have been sold up the river. In a bad month I get $2.5 in bank fees; on average its... $0
No, I usually pay nothing per month.......I pay if Ive used a non-kiwibank cash machine for some reason. ASB used to be a min of $10 a month and $20 was typical.....the 25basis points difference in my mortgage was $2 x 20 a month saved.......( I pay every 2 weeks) though actually I still paid that to pay it off quicker.
regards
Always hard to comment without knowing the specifics of the accounts - but at ASB prior to mortgage we paid about $2 a month in fees (max); after mortgage it was $0 due to fees rebate. So would really just sound like you were running the wrong accounts for what you were doing.
Moved my mortgage for a better saving than 25 basis points though - first to MU that was 125 basis points at that point; then to TSB which was 75 (and 25 better than KiwiBank).
And at least now supporting a Bank that pays over $20 mill a year out into the community rather than bludges off the tax payer.
I can only speak from experience - years ago we applied for a mortgage from Kiwi Bank, within few minutes they decliend our application. Went across the road to two Australian banks, both approved our loan and we have been with them ever since. So I am one of those who contrubuted to their big fat profits - I guess they took a risk on me - so what's fair is fair. I'd have gone with Kiwi Bank but my experience is that they are next to useless!
You do realise that sensible credit management is different from giving loans to everybody who walks through the front door don't you? It's not like they wasted a lot of your time on this either. In my opinion this implies marginally higher standards from KiwiBank compared to some others, though in general banks in NZ don't take excessive risk. I have also observed the same thing in person.
They might have been next to useless to you, but many would prefer a better safe than sorry attitude for their investments, i.e the investors, depositors, tax-payer bailout providers.
Ah right, when I went to kiwibank they said 80% max which I easily met, I think my one is about <15%.....so that and a perm job was no issue......
Good on TSB.....their risk profile sounds relativley minimal given the volitility in the future, no bad thing....which is interesting because TSB actually has a lower rating form the ratings agencies I believe....it seems "size" counts for a lot......
regards
which is interesting because TSB actually has a lower rating form the ratings agencies I believe
Which reflects parentage. KiwiBanks rating reflects its ownership by NZ Post and the Government; it is worse than every bank on both tier 1 capitla and total capital ratio except Rabobank (and BNZ one of the two measures).
In and of itself KiwiBank is shonky which is another reason I hate it - it only gets away with its bad financial management due to its implicit Government guarantee. Hmmm - wonder where those have bitten the taxpayer in the a** recently...
FYI from Greens on any guarantee of money invested via NZ Super Fund
“Our proposal to offer a public KiwiSaver fund to lower costs and fees does not come with any Government guarantee,” Green Party Co-leader Russel Norman said.
“If any KiwiSaver provider went broke, the Government may have to respond as National did when AMI got into trouble. Our public KiwiSaver fund would have no more implicit guarantee than any other provider.
“What I can guarantee is that by reducing KiwiSaver fees and costs significantly, New Zealander’s nest eggs will grow considerably.”
Australia’s fee-cutting superannuation reforms announced in September will increase savers’ nest eggs by A$150,000 for a 30 year-old worker earning an average full-time wage.
“The Australian Government is enhancing the savings of Australians significantly through economies of scale. Why wouldn’t we do the same for KiwiSavers here?” said Dr Norman.
“A public KiwiSaver fund is a better option to help 1.8 million New Zealanders saving for their retirement than selling state assets to the few who can afford to invest in them.”
The Green Party will create a public KiwiSaver fund to lower costs and boost people’s nest egg on retirement. To achieve the necessary economies of scale to achieve this, the fund will be managed by the Guardians of the New Zealand Superannuation Fund — a $16 billion fund. The front-end provider could be Kiwibank or the Inland Revenue Department, as recommended by the Government-appointed Savings Working Group, depending on who can do it most efficiently.
“The best way to ensure KiwiSaver providers don’t get in to a situation where they’re too big to fail is to regulate the industry well,” said Dr Norman.
“Without good prudential oversight and reporting, we could end up with another AMI situation where the Government has little choice but to bail out poorly regulated KiwiSaver providers.
“One of the first tasks of the new Financial Markets Authority (FMA) will be to ensure KiwiSaver providers are reporting their fee and cost structures in a fully consistent and transparent way.
“The FMA can also issue clear parameters for performance-based fees, such as ensuring they’re measured on an after-tax after-cost basis, and include clawback provisions to recoup poor performance.”
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