Winston should set up his own KiwiSaver fund

October 21st, 2013 at 12:00 pm by David Farrar

Hamish Rutherford at Stuff reports:

Winston Peters is proposing to establish a new state-owned fund, saying private schemes were a “pot of gold” for providers, but not savers.

Speaking at the NZ First conference in Christchurch today, Peters said KiwiSaver providers had extracted excessive fees from savers. Since it was formed five years ago, providers had “sucked off $325 million from the people paying into the scheme”.

According to Peters, an “independent source” had told him that over the next 30 years, the amount of fees would climb to $22 billion.

“KiwiSaver is a pot of gold – for the providers – not the savers.”

Peters today proposed that a scheme on the same footing at the New Zealand Superannuation Fund, called KiwiFund, which would be government guaranteed.

Return would be “a lot higher” than they were in private providers, Peters said.

“Our plan is to change KiwiSaver so that it is a truly Government backed and managed retirement fund. 

I’m in Carmel Fisher’s KiwiSaver Fund and very happy with the returns thank you.

If Winston thinks KiwiSaver Funds are not delivering a good enough return, then there is a simple solution.

Winston should set up his own KiwiSaver Fund. This would allow all those who believe in the financial genius of Winston to invest their life savings with him, and get this guaranteed higher return he talks of.

The Herald reports that Winston’s policy may cause problems with Labour:

New Zealand First has put a potential roadblock between itself and a post-election coalition deal with Labour by setting a bottom line on retirement savings that Labour is lukewarm on at best.

Leader Winston Peters told NZ First’s annual conference in Christchurch yesterday that the party wanted to effectively nationalise KiwiSaver by putting it “on the same footing as the New Zealand Super Fund”.

So many politicians wanting to nationalise so many things – it is like being back in the 1970s.

The KiwiFund policy was “most definitely” a bottom line for any post-election coalition talks next year.

But while Labour leader David Cunliffe said his party was happy to look at the policy in more detail, “we don’t think that the KiwiSaver industry is fundamentally broken.

Some sanity from Labour. Yay.

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53 Responses to “Winston should set up his own KiwiSaver fund”

  1. nickb (3,687 comments) says:

    The obvious reason he is promoting this is so he, Cunliffe and Tooray can dip into it to fund their commie Think Big projects a la the USA Government and Social Security.

    Anyone with an IQ over 80 (i.e., anyone to the right of centre) should lay down in a ditch and be prepared to die over this ever happening. Because the eventual outcome will be Governments dipping into it (but we will pay it back when we are back in surplus! etc). I can hear it now already.

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  2. Sir Cullen's Sidekick (890 comments) says:

    “But while Labour leader David Cunliffe said his party was happy to look at the policy in more detail, “we don’t think that the KiwiSaver industry is fundamentally broken.

    Some sanity from Labour. Yay.”

    You are so naive David Farrar. Sanity from Labour? Fat chance. “happy to look at the policy in more detail” means, when the push comes to shove, we will bend over backwards to accommodate Winston’s polices.

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  3. Monty (978 comments) says:

    Isn’t this a variation on rob muldoons 1975 election policy?

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  4. dime (9,980 comments) says:

    Dime does not trust “kiwisaver” one bit.

    I dont care about the “free money” from the govt.

    Dime stays out.

    Ill do it myself.

    These fuckers wont be able to help themselves as kiwisaver gets bigger.

    Im surprised its not compulsory (say 2%) and everyone gets the same amount, no matter what they earn.

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  5. dime (9,980 comments) says:

    oh yeah, LOL @ the greedy fuckers who think providers shouldnt make a profit.

    “they should make $50,000 as wages and thats it” lmao

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  6. kowtow (8,522 comments) says:

    Maybe we could have a fund that is 51% taxpayer backed ,you know like the partial asset sales?

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  7. chuk (40 comments) says:

    Nickb has it right above.

    Winston is going to invest all these savers’ funds in buying NZ assets and still expect great returns but offer a government guarantee as well. It sounds like a win, win, win situation. How can it possibly go wrong? Oh yes, Winston is involved……..

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  8. gazzmaniac (2,307 comments) says:

    I think a better solution would be self managed funds, like the ever growing Self Managed Super Funds in Aussie.

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  9. dime (9,980 comments) says:

    gazz – problem with that is everyone buys rental properties heh

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  10. gazzmaniac (2,307 comments) says:

    How’s that a problem? If that’s what people think the best investment for their retirement is then that is a matter for them.

    Personally I’ve decided not to touch rental properties with my SMSF, I’ll be sticking with shares and cash and doing any property investment outside super.

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  11. Simon (727 comments) says:

    Before the RBNZ started printing money Fisher Fund (like all the others) couldn’t even match the inflation rate.

    Asset price appreciation due to banks & RBNZ creating credit. Cant continue in the medium term. Returns back below the rate of inflation at some point.

    Kiwi saver contributions are taxed, the kiwi saver earnings are taxed and soon the distributions will be taxed. (capital gains) Tax Tax Tax. Kiwi saver is for the sheeple. (Sheeple pay off your bloody mgtee first FFS)

    Yep kiwi saver will end up being nationalised in the name of fairness & equality. Or their might be a one off tax grab of 20%. The State might force the fund providers to invest in green jobs any manner of rubbish.

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  12. gazzmaniac (2,307 comments) says:

    Aussie’s super scheme is also taxed at a concessional 15c rate.

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  13. lilman (960 comments) says:

    Winston is onto a winner here.
    He could get it of to a flying start by using the money that belonged to the taxpayers of NZ that he was meant to give back,but never.
    Go Winston,a good example of masturbating to much, take note Len.

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  14. bringbackdemocracy (427 comments) says:

    Eastern Europe here we come!!!!

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  15. Mobile Michael (452 comments) says:

    Isn’t this the same proposal that Winston put forward in 1996. It was put to a referendum and rejected by almost 90% of voters?

    Only parties that refuse to be part of a government that has Winston in it will get my vote.

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  16. RRM (9,933 comments) says:

    Surely Winston would need more than $158k capital to start up a kiwisaver fund?

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  17. JeffW (327 comments) says:

    Any poll shows that NZers do not trust politicians. And yet so many NZers want to give politicians more power.
    What gives?

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  18. CJPhoto (222 comments) says:

    While I haven’t read their full policy, I think the Green’s policy on this I actually agree with:

    The saver has the choice of scheme – choice=yay
    The government offers a fund to the public

    It could be as simple as a retail add on to the NZ Superfund. They would need to change a bit for the new mandate (redemptions earlier than currently planned) but they would also have access to a lot more funds.

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  19. dime (9,980 comments) says:

    “Any poll shows that NZers do not trust politicians. And yet so many NZers want to give politicians more power.
    What gives?”

    People dont think?

    People have been conditioned to hate corporations and businesses. Which is just plain weird. The thought of some dude making money as he makes other people money pisses them off.

    “he should be making me money for free”

    We are a messed up little country.

    Also Winstons base is selfish old people.

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  20. Simon (727 comments) says:

    If you have a mortgage pay this off first before paying into kiwi saver.

    Mgtee int rates 5%. By paying this off you make a guaranteed 6%.(depends on your tax rate)

    No kiwi saver provider will match the returns available to you by paying off your mgtee first.

    If you have a kiwi saver account apply for hardship or whatever bollocks to get your money out to pay off the bank loan.

    Winston, Key & Cunnliffe just remember they are all wankers.

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  21. Adolf Fiinkensein (2,903 comments) says:

    Don’t worry.

    Winston will get Gareth Morgan to manage he fund.

    Everything will be fine.

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  22. Paulus (2,632 comments) says:

    What happens when you are the only Shareholder of everything in New Zealand Stock Exchange ?
    Australia does NOT place with 75% in Australia. Stupid comment.
    The size of any share market is governed by supply and demand.
    Balance between local and offshore investments has to be balanced.
    Imagine if EQC had placed its billions of Reinsurance cover only within New Zealand companies, and not 99.99% offshore throughout the world reinsurance markets. Called BIG BANG.
    Economy of scale Winston. Stop behaving like a prick (no possible).

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  23. david (2,557 comments) says:

    It would be a Green Party wet dream. just think of all the wind turbines and renewable energy subsidies that could be supported out of the combined Kiwisaver investments of New Zealanders. returns? don’t let practicalities get in the way of a policy that we know is good for you.

    Don’t let Government within a million miles of my savings – and that includes you Winston.

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  24. Albert_Ross (298 comments) says:

    As previously noted Gazzmaniac, what you actually like about the Australian system is not that it’s compulsory, or that it allows self management. Neither of those in itself is clearly superior to the NZ approach of a basic minimum for all topped up by whatever additional provision the individual chooses to make for himself, however he chooses to make it.

    No, what you actually like is that Australian retirement savings attract favourable tax rates. Of course that means that Australian retirement savers are likely to end up better off on average than New Zealand retirement savers (although those without savings would actually be better off with NZS than they are with the basic Australian pension). But is that really the best public use of the resource? Bearing in mind that most of the benefit of tax concessions goes to those who save most, ie the higher income earners? Compared to the things that the Government could otherwise do with the tax income that it forgoes?

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  25. Archer (210 comments) says:

    So Winston wants to take the money I have deducted from MY wages and that goes in to MY kiwisaver account (the account I see with MY name on it when I log in to online banking) and “invest” that money in Solid Energy? I think not.

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  26. MT_Tinman (3,204 comments) says:

    dime (7,509) Says:
    October 21st, 2013 at 12:46 pm
    People dont think?

    People have been conditioned to hate corporations and businesses. Which is just plain weird. The thought of some dude making money as he makes other people money pisses them off.

    “he should be making me money for free”

    We are a messed up little country.

    Also Winstons base is selfish old people.

    Perfectly put.

    I dropped a group to their conference yesterday.

    Talk about old! Winnie pulled up while I was unloading, christ even he looks bloody old.

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  27. gazzmaniac (2,307 comments) says:

    …Compared to the things that the Government could otherwise do with the tax income that it forgoes?

    A lot, if not all, of that taxable income wouldn’t exist if it weren’t for super. It’s also better than paying people to save like Kiwisaver.

    I also like the fact that Australia has $1trillion of household savings which also wouldn’t exist if not for super. It’s a far better position to be in than having net household debt like NZ.

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  28. Alan (1,087 comments) says:

    People, read what he said.

    He’s only suggesting setting up another provider; not forcing anyone to use it.

    You’re not compelled to have your bank account or mortgage with Kiwibank, this is just the same.

    Use them, don’t use them, your choice.

    Not convinced by the need for it, but really don’t see the harm either.

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  29. CJPhoto (222 comments) says:

    Alan – I think you read it wrong, specifically “Our plan is to change KiwiSaver so that it is a truly Government backed and managed retirement fund. ”

    He wants to have just one fund going forward. Greens policy is what you are suggesting – a Government backed option.

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  30. gazzmaniac (2,307 comments) says:

    Alan – The harm is that the government super fund will be guaranteed by the government, which probably means socialising the losses. That will make the government super fund a risk free at the expense of the retail funds. Just look at what happened with South Canterbury Finance after the government promised to bail out investors.

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  31. KevOB (267 comments) says:

    Having set up the Samoa National Provident Fund which takes 10% of the countries salary & wage payments into individual personal accounts I take a special interest in super matters. Winston has rightly fingered at least two major problems; Muldoon foresaw these resulting in the closure of Rowling’s savings scheme.

    The biggest problem of such schemes is investment policies: the scale is such that no government can relinquish control. The Cullen Fund is running out of domestic investment opportunity but where will it get the foreign exchange to invest offshore? That has to come from our exports if is not to damage long term balance of payments. Kiwisaver presents even bigger problems of scale and ceaseless contributions sloshing around the money and share markets provide a field day for brokers and ticket clippers. Having a large number of fund managers may be beneficial if they were actually placing long term productive investment funds but otherwise it is largely a scramble for market position with the contributors having no control except to shift, if able, to another scrambler. There is no way any provider can exceed long term average yield on a broad based investment grade share market portfolio. Timing differences will give some a temporary advantage, but not over a long term. Long term growth is required for long term funds and this requires placement in productive assets.
    Most account based national savings schemes have invested all the deposits in government securities exposing future governments to budgeting for substantial interest provisions which in Malaysia e.g. reached 55%. These funds ultimately morph into unfunded pension schemes with the government picking up the national obligation rather than paying out individual contributions.

    Our Kiwisaver is a bit half baked: if members are to expect to control their investment profiles there has to be opportunity for that which on the national scale can never be the case in our small economy. Global direction and policy are needed and there is a lot to be said, unless you are a competing provider, for having all the funds pooled. Providers cannot have the freedom to invest offshore as they may wish and with individual accounts feel they are in control which is at odds with payment due out at 65. Competition amongst providers may feel good but must increase costs. Kiwisaver will be a continuing issue. Samoa solved some of these problems by turning the SNPF into almost a peoples bank where members can borrow part of their contributions at interest.

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  32. Alan (1,087 comments) says:

    @CJPhoto

    “Peters said the fund would invest in New Zealand land and other assets, although he later clarified that it would not be exclusively focused here. The fund would have guidelines, but would be run independently from the Government.

    Private providers would still be allowed to exist but Peters expected Kiwis would choose his “world class model, unsurpassed by anything in the world” over the “high fees and low returns” they were getting now. ”

    http://www.stuff.co.nz/business/money/9305797/Peters-names-price-for-any-coalition-talks

    See above, as you can see, I really haven’t read it wrong, no compulsion, just like Kiwibank.

    He does have a point, fees are high, esp on things like tracker funds. I have some index funds offshore being managed at 0.40%, equivalent funds in NZ are charging anything between 1% – 1.2%

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  33. Alan (1,087 comments) says:

    @gazzmaniac I agree the state guarantee is a bad thing, that’s the only thing I really take exception to.

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  34. alwyn (427 comments) says:

    @Monty at 12.15pm.
    What Winston is proposing is not what Muldoon did in 1975. It is the opposite of that and is in fact very similar to the Douglas scheme implemented by the Kirk Government and scapped by Muldoon.
    The trouble with KiwiSaver, and schemes such as the Cullen Fund is that there is no real way to keep politicians thieving little hands off the stash of cash that builds up. They see any large pool of money as something they can seize and use to try and buy popularity in the next election.
    I joined KiwiSaver in the first month. I knew that I could withdraw all my money after five years as I would be over 65 at that time. I didn’t think the politicians would be able to make any significant changes during the first five years and I turned out to be right.
    However for someone much younger I didn’t have any real faith that the funds put in would be safe. Both the Green Party and Winston’s mob show me that I was right in the depressing view. Both of them want to grab the money, or at least control where it will go, and to hell with the fact that it is individual’s retirement savings. They see it as theirs to play with.
    These idiots are following the path taken by the Argentinian Government in 2008 when the nationalised the Countries Super funds and blew the lot on vote-buying schemes. To bad for the people whose savings were wasted.

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  35. CJPhoto (222 comments) says:

    @Alan: thanks – a different article than what I read. Ditch the government guarantee and it isn’t a bad policy per se.

    As long as I dont have to sign up to it.

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  36. alwyn (427 comments) says:

    @Alan.
    Your quoted figures fo index fund (Tracker) fees seem to be very high.
    Smartshares offer exchanged traded index funds of various kinds that charge 0.60% fees.
    I regard that as exorbitant but it is only half the figure you say you are being charged.

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  37. Pete George (23,591 comments) says:

    Fees charged are just one part of the equation. I’d be happy to pay higher fees if I got better management and better returns for it.

    Like DPF I’m quite happy with my Fisher KiwiSaver fund.

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  38. s.russell (1,642 comments) says:

    When I first read of Winston’s pronouncement I was aghast: nationalising Kiwisaver? Insanity! But on closer reading I realised he just wants the Govt to set up an alternative fund manager (like KiwiBank is an alternative bank). So not nationalisation. You can stiff choose a private provider (Fisher Funds for me, like DPF). Whew! Still bonkers but basically a harmless sort of bonkers – the only people who will suffer from this are the fools who actually choose to put their money into the Winston Fund.
    As for the Govt guarantee, I have no problem with that if the fund pays for it (like the scheme for banks etc post GFC). It will cut returns but that’s OK. In fact I think there are already KiwiSaver funds with a capital guarantee. Just so long as it is not subsidised by taxpayers.

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  39. Kleva Kiwi (289 comments) says:

    The problem is, moving forward, that any Leftie government is going to make Kiwisaver compulsory. This in itself is great cause for concern, as not only will people be forced into these saving scemes, fringe lunatics like Winston will try push through nationalising schemes such as this.

    The whole Kiwisaver system is another Leftie scam. Lets pay people to save their money, you know, with money that we taxed off them in the first place. Just another underhanded socialist model for redistributing wealth, all stemming from the Lefts assumption that wealth is finite.

    If this bribe was actually just lower taxes, there would be more wealth in the private sector to actually stimulate real economic growth, from the average person having more disposable income for consumer goods to business having extra finance to reinvest in their business.

    The whole Kiwisaver scam needs to be dumped and a new system that offers lower taxes to those who use it and the ability to withdraw out of it at any time. Who the hell are you to tell me when I can and cannot have my own money…

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  40. Rick Rowling (813 comments) says:

    Are there any providers out there that charge fees based on returns, or better still, as a percentage of returns over a published index?

    Bullshit “2% of your balance” type fees, irrespective of if they make or lose money for you seem to be ubiquitous, and will eat through the “free money from the gummint”.

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  41. Liberty (267 comments) says:

    So it is another Winston bottom line policy.
    That is just a valid reason for National to tell Winston to sod off.

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  42. Ed Snack (1,883 comments) says:

    KevOB, why do you think that competition will increase costs ? Surely a single provider will increase the cost instead, not because it is more expensive but because there’s nothing to stop them charging what they like, and you’d have to like it or lump it.

    Competition may not be everything in this case, there’s a fair bit of regulatory cost to be absorbed, but there’s a fair difference in the fees on existing Kiwisaver schemes. Just as an example, the ASB fees are significantly lower than most others to the point where they can earn a bit less and yet grow your investment faster.

    My real concern is the Argentina model, let an unscrupulous government take charge of your savings is a foolish thing to ever contemplate. Even the idea of making it a Bank has political issues, at what point does the connections of the person concerned become important on whether they get a loan or not; or perhaps their “Victim Poker Status points”. Nope, trust a government about as far as you could throw them.

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  43. CJPhoto (222 comments) says:

    @Rick -the likes of Milford and Fisher charge a base fee of approx 1% and a performance fee of approx 10% from memory.

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  44. Albert_Ross (298 comments) says:

    Gazzmaniac, how is providing a favourable tax rate – which costs a lot more than the KiwiSaver annual $521, and mainly benefits high income earners – not “paying people to save”?

    Why would the taxable income not exist if it weren’t for super? What would people be doing with the money if they weren’t putting it into super saving, and how would that mean a lower tax take?

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  45. slijmbal (1,236 comments) says:

    @Alan

    “He does have a point, fees are high, esp on things like tracker funds. I have some index funds offshore being managed at 0.40%, equivalent funds in NZ are charging anything between 1% – 1.2%”

    Nope in terms of straight funds. There are few index based products in NZ but the 2 I know from Smartshares and Superlife are closer to 0.6%. If we’re talking ETFs then one can get fees as low as 0.2% (Australian based ETFs on mainstream products) but one can get up to 0.7% for index funds and ETFs in NZ.

    The write up of kiwisaver fees is here http://www.canstar.co.nz/images/star_ratings_reports/nz-kiwisaver-sep-2013.pdf

    Smartshares actually charge more for their kiwisaver than their normal fund. Why? It’s compulsory of course. Though it’s close to cheapest in terms of fees for purely equity based investing – I would not use it as it only invests in NZ and OZ with optional cash on the side.

    Unless you’re able to pick winners then I would always choose a fund based on asset classes and cheapest fees.

    Anyone in a fund that charges 1% and an average management fee of $30 needs their head read as that’s more like 1.6% p.a. for a typical $5K saved.

    Of course, most people do not have a clue and Winston does have a point in that the fees should drop over time as the funds get larger but I question whether that will happen as most kiwisaver providers lost money for the 1st 3 years and without minimum $1 bn in funds or larger fees they will not make money in the future.

    A large $1bn fund would have maybe 200,000 members so the costs of just talking to and managing those customers would be several million dollars thus is not exactly a big money earner by banking standards until the funds managed start to hit $10 bn+ at which point they would be creaming it if the fees remain as current.

    The bigger funds providers are playing a long game and are aiming to get tens of billions under management.

    So, fees were probably historically not high considering the sizes of the funds but really could start to drop now as the funds get larger. If we can encourage a culture of punishing high fee funds through switching then that should keep fees down.

    Winston seems to be saying we should use the same management approach as Cullen’s folly fund but forgets that it is purely long term focused and doesn’t care much if it makes short term losses. Most investors don’t get that. Mind you if there was a fund that mimic’d Cullen’s folly with low fees (namely predominantly index based) then I would seriously consider it.

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  46. WineOh (630 comments) says:

    Incidentally DPF- good comments from you on ‘The Panel’ this afternoon.

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  47. gazzmaniac (2,307 comments) says:

    how is providing a favourable tax rate – which costs a lot more than the KiwiSaver annual $521, and mainly benefits high income earners – not “paying people to save”…

    It’s only a cost if the government was guaranteed to get that money to begin with – and that’s far from guaranteed.
    You are right, it isn’t saved it is either used to pay off debt and not taxed, or it is spent, which attracts a one off GST of 15%. There would be a short term gain to the government.
    If it is not saved, it won’t used to invest in investments such as shares, and will not have a return, so there will be no taxes over the lifetime of the non-investment. So the government loses in the long term. Additionally, the government has to pay for that person to live when they’re old, a loss to the government (assuming we shit-can universal super).

    Maybe there will be a cost to the government, and maybe there won’t.

    I maintain that income taxes should be dropped regardless, and doing so would reduce the need for a concessional super scheme.

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  48. Wayne Mapp (67 comments) says:

    David,

    A cute but ridiculous suggestion.

    As you well know, political parties exist to suggest public policy, not to personally try and do each thing they suggest.

    You might just as well have said that if ACT wants charter schools, they should set up their own. Or if the Greens want to clean up rivers they should choose one and clean it up.

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  49. gazzmaniac (2,307 comments) says:

    The Greens don’t want to clean up rivers, they want to control people.
    They are trying to do exactly that.

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  50. emmess (1,428 comments) says:

    I have not heard anyone complain about the Kiwisaver fees until now.
    I don’t know what the return on my Kiwisaver has been but I know has it been growing well as I have been contributing but I just realized how ridiculous this policy is.
    I enrolled by my kids in Kiwisaver about 6 years ago to get them the $1000 kickstart. The accounts are now worth about $1600 each so that’s nearly a 10% annual return for no contribution.

    So how can fees be an issue for anyone actually working and contributing?

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  51. slijmbal (1,236 comments) says:

    @emmess

    that’s more like 8% p.a. compound not 10 and you (actually taxpayers) paid approximately $250 in fees at a rough estimate over 6 years. Expand that over 40 years and presume the amounts invested are 6 figure amounts as they should be if you’re earning and saving. Even in this example it is the difference between 8% and 11 % compound p.a. approx.

    Small differences in fees will make tens of thousands of dollars difference over a working lifetime.

    However, as per my original posting fees have been about appropriate for the costs to date but could become a bit of a cash cow if not watched carefully.

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  52. Alan (1,087 comments) says:

    Fees are a massive issue, how many one cant grasp that is beyond me, if you have 4% returns, a 1% fee is a quarter of your growth.

    Imagine $10k invested over 40 years, at a 4% return it would be worth 46,163 at the end, at 3% only 31,670.

    Account fees are destructive to savings. A 0.5% difference has massive impacts on end results.

    Open Excel and ply with the numbers.

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  53. Alan (1,087 comments) says:

    And of course its taxable.

    I have very little time for Winston for obvious reasons, but he’s raising an important issue here. Also virtually no managed fund has delivered superior results when higher fees are factored into costs compared to passive, cheaper, index tracker funds.

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