Allowing only the wealthiest investors to manage their own retirement savings raises equity concerns, say critics.
Big-time, sophisticated investors could ultimately be allowed to withdraw and manage their own KiwiSaver funds, says National's commerce spokesperson Andrew Bayly.
It's not the party's policy yet – for now, he and leader Christopher Luxon have only announced a plan to allow workers to split their savings between two or three different funds.
But, asked by Newsroom whether National would ultimately let people take out their money from KiwiSaver and manage it themselves, Bayly said the party would consider it.
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It's an extension of the policy National announced this week to allow savers to allocate their savings across multiple providers, to gain higher potential returns over their lifetime. "The money in every KiwiSaver account belongs to the person who saved it."
Bayly agreed the next step was to give them freedom to entirely withdraw their savings and invest them on their own terms.
"That's a possibility for large, sophisticated people," he says. "We wouldn't allow everyone to do that. In Australia you'd opt out at a certain level."
At present, workers are not required to contribute to KiwiSaver – but they're once they're in, they can't opt out. They can only take out their money in the case of extreme hardship, to help pay a deposit on a first home, or when they retire. National has proposed young people should also be allowed to temporarily take out money to pay the bond on their first rental property.
The Australian retirement savings scheme, on the other hand, allows investors to move their money to a self-managed super fund. It's not a simple endeavour: the self-managed fund must have six trustees or directors, who must develop a fund investment strategy, Bayly says. The self-managed funds are regulated by the Australian Taxation Office.
"I'm not saying we're committed to that," he said. "As balances grow, that might be something we consider. But we'd have pretty strict rules around that."
Bayly says it wouldn't be difficult to distinguish between those investors who could be trusted to manage their own retirement savings, and those who couldn't.
"You'd just set a minimum balance. That's probably the easiest way, if we were to do a policy like that. But we wouldn't allow everyone [to manage their own savings] because most people are not sophisticated investors."
Barry Coates, the founder of ethical investment charity Mindful Money, is critical of a proposed regime that entrusts the wealthy with greater autonomy than poorer savers.
"I think you've got to question the double standard there. Is this really fair, that you're putting restrictions on one group of people, but not on those who are wealthy? They would get the benefits from KiwiSaver but not bear the same restrictions as others," he says.
"Just from a straight equity and fairness perspective, I think you'd have to raise questions about that."
Coates says even if the rules for withdrawing from KiwiSaver were equitable, he wouldn't support people being allowed to take out their money.
"I think the KiwiSaver scheme has a rationale and purpose. And I think that rationale and purpose is as as needed today as any other time," he says.
"And while we need improvements to the program, I'm not sure that the core logic of why we have this retirement scheme is flawed. I think, if anything, we need to be asking the question of how can we scale it up? Because obviously KiwiSaver is not providing sufficient funds for most people to meet their retirement needs."
Mike Heath, the general manager of KiwiSaver provider InvestNow, was similarly sceptical. "KiwiSaver is 17 years old, so how it's structured and how it works shouldn't be set in stone. It definitely warrants a regular review.
"But I'm dubious about his definition of 'sophisticated investor'. How much money you have does not correlate to your level of understanding and or sophistication."
He argues the regulation of KiwiSaver funds protects savers. "Investing can be hugely risky," he says. "Regulation is there to ensure that people are performing above board and credibly. You look at the Ponzi schemes and things of that nature historically, when people have been burned. You just have to be really, really careful."
Even within the National Party, Bayly's support for allowing people to pull out of KiwiSaver is contentious.
National's former leader Simon Bridges says he, by contrast, would make retirement saving compulsory, and had voted accordingly in the 1997 referendum – one of just 8.2 percent of voters who did.
He and NZ First leader Winston Peters were addressing a political panel at the Financial Services Council conference, in Auckland, after Luxon and Bayly had unveiled their KiwiSaver policy.
Peters had been the architect of the compulsory retirement saving referendum. "We said, we'd give you a tax cut but you had to put it into a sovereign fund of your own, in your own name. That was the plan. And I got smashed by the media. They voted me down but they didn't vote away the problem.
"The essence of conservatism is savings – always has been. So why would conservatives be against the savings funds?"
Bridges said Peters had been right: "I didn't agree with much you were saying at that time, but I did agree with that. And I did vote for it."
Financial Services Council chief executive Richard Klipin is calling for a full review of KiwiSaver, with increased contributions and increased participation. He says their research shows 59 percent of New Zealanders don’t feel prepared for retirement.
"Freedom to choose where your KiwiSaver goes will empower consumers and give them choice," he says. "However, it may add some complexity to what is a beautifully simple system."
