‘Roads don’t pay div­i­dends’ for savers

Sunday Star-Times - - BUSINESS - JULIE ILES

New Zealand First has pro­posed to bring a state-run Ki­wiSaver to the ta­ble in or­der to pro­mote lo­cal in­vest­ment in in­fra­struc­ture, but ex­perts are scep­ti­cal. The gov­ern­ment de­fault fund, called Ki­wiFund, was first pro­posed by leader Win­ston Pe­ters in the run up to the 2014 elec­tion, as a ’’bot­tom line’’ in coali­tion ne­go­ti­a­tions.

Pe­ters called the ex­ist­ing sys­tem a ‘‘pot of gold’’ for providers and not savers.

Ac­cord­ing to Pe­ters, an ‘‘in­de­pen­dent source’’ told him that over the next 30 years, fees would cost $22 bil­lion.

Claire Matthews, a Ki­wiSaver ex­pert at Massey Uni­ver­sity, said it was ’’rea­son­able as a ball­park fig­ure’’ but sounded worse than it was.

‘‘It’s spread over a large num­ber of funds and they are ac­tu­ally do­ing some work for it, so it’s not just free money.’’

She said sec­tor-wide, fees were $240 mil­lion in 2015, and $290 mil­lion last year.

Matthews said she found the pol­icy ‘‘highly un­de­sir­able’’ be­cause it could feed into a nervousness New Zealan­ders have around Ki­wiSaver.

‘‘Be­cause it’s a gov­ern­ment pro­moted and gov­ern­ment de­signed scheme, peo­ple form this be­lief the Gov­ern­ment is go­ing to take the money.’’

She said a gov­ern­ment fund would have a ‘‘con­ta­gion af­fect’’ on other Ki­wiSaver funds.

The idea for a state-run fund was first floated by for­mer Green co-leader Rus­sel Nor­man in the run up to the 2011 elec­tion, as a way to lower fees for in­vestors.

Econ­o­mist Shamubeel Eaqub, said the pol­icy seemed ’’like a so­lu­tion in search of a prob­lem’’.

Eaqub is a di­rec­tor for the Ki­wiSaver man­ager Sim­plic­ity.

‘‘Just be­cause some­thing is gov­ern­ment-owned doesn’t mean it’s go­ing to have low fees. That was the ar­gu­ment for Ki­wiBank but it hasn’t turned out to be a very low cost busi­ness per se.’’

Eaqub pre­dicted fat would get trimmed on funds as dis­clo­sures on fees be­came re­quired next year and New Zealand fol­lowed the US’s trend to­wards in­vest­ing in pas­sive funds with lower fees.

He said in­fra­struc­ture in­vest­ments were some­thing pri­vate Ki­wiSavers rarely did be­cause they weren’t liq­uid enough, and did not gen­er­ate high re­turns. ‘‘Roads don’t pay div­i­dends.’’ He said it was in the best in­ter­est of Gov­ern­ment to bor­row the money from for­eign sup­pli­ers of cap­i­tal who lent money for ‘‘stupidly low in­ter­est rates’’.

Eaqub said the state-run Ki­wiSaver would do best to use man­agers from the New Zealand Su­per­fund or ACC to min­imise man­age­ment fees.

New Zealand Su­per­fund spokes­woman Cather­ine Etheredge said 2.5 per cent of the su­per­an­nu­a­tion fund was in­vested in in­fra­struc­ture, though none of this was through bonds.

‘‘As a long-term in­vestor seek­ing to max­imise re­turns, the Fund is heav­ily weighted to growth as­sets rather than fixed in­come as­sets such as bonds,’’ she said.

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