Winston Peters has let his distrust of business and ignorance design a flawed superannuation investment policy:
A new superannuation fund to save billions of dollars for KiwiSaver contributors over the next thirty years will be a central plank for New Zealand First at the 2014 General Election. . . .
Mr Peters told delegates that private funds managers were sucking the lifeblood out of KiwiSaver, and in five short years had already taken $325 million in management and investment fees.
“Independent forecasts show that over the next thirty years these funds managers will take more than $22 billion from KiwiSavers and there is no government guarantee that the remaining funds will be safe.
“There is huge pressure from the finance industry to get their hands on more retirement funds. The figures show these companies will make spectacular profits at the expense of people saving for their retirement.
“Our plan is to change KiwiSaver so that it is a truly government-backed and managed retirement fund. Because of the economies of scale, and the elimination of hordes of ticket clipping fund managers, costs will be greatly reduced. People who pay into KiwiSaver will get their full return.”
Has he any idea of the cost of this? Can he guarantee the bureaucrats who will be managing the funds will be any less expensive and any better at investing than private fund managers?
Under the New Zealand First plan, KiwiFund will be government-guaranteed and it would invest substantially in New Zealand.
“People saving through KiwiFund will be buying back New Zealand. KiwiFund will invest in buying back farmland, state assets and critical infrastructure. Funding will also be provided to support smart local companies to develop new products and create jobs.
A government guarantee passes the risk to taxpayers.
Super funds invest overseas for very good reasons. Funds based only, or substantially, in New Zealand would be vulnerable to natural or financial disasters here, some overseas investments insulates funds from that.
Having financial eggs is several baskets is a sound and sensible investment strategy.
Landcorp, the state owned farm company, makes less than 1% return on assets. How will KiwiFund’s farms do better than that?
Who will pick these smart, local companies and what guarantees will there be that they will provide sustained returns necessary to make superannuation sustainable?
“We have to invest in our own future. Overseas pension funds and corporate investors can hardly believe their luck – and are buying up everything they can in New Zealand.
“New Zealand First says its time to stop this sell out. We are already well down the road to serfdom in our own country.” . . .
Other people risking their money in our businesses isn’t a sell-out. It’s welcome inward investment which boosts share prices.
How much does he think these assets would be worth without overseas investment?
Mr Peters warned there would be “howls of outrage” from the private funds managers who would “fight to the death” to retain their $22 billion gravy train.
“In the United States, private funds managers lost billions of dollars of pension funds during the 2008 financial crisis. We simply cannot afford to let that happen to the retirement savings of New Zealanders.
And how would he guarantee that public funds wouldn’t do the same in the next financial crisis?
“KiwiFund will enable us to build a high performance economy from which all New Zealanders will get the benefit,” said Mr Peters.
KiwiFund would nationalise private savings.
It would jeopardise superannuation and threaten its sustainability by increasing the risk and reducing returns.
Investment policy must be based on sound financial sense not xenophobia and populist bias against business.
Peters says KiwFund will be a bottom line in coalition negotiations.
Labour and the Green Party might be stupid enough to agree to it, National wouldn’t.
But history tells us what Winston says is a bottom line now and what actually is if he’s in a position to negotiate after next year’s election won’t be the same thing.