Will KiwiSavers be denied control of their savings?
Ralph Stewart has deep concerns about the idea that KiwiSaver members get defaulted to a government run annuities programme, dubbed KiwiSpend.
Sunday, October 27th 2019, 2:11PM 
6 Comments
In the Government’s triannual review of Retirement Income Policy, Auckland University’s Retirement Policy and Research Centre has recommended the introduction of KiwiSpend, a new scheme that would deny investors in KiwiSaver access to their savings when they reach age 65.
Instead they would be defaulted into a Government-regulated annuity scheme, providing a regular income in retirement. KiwiSavers would have the option to opt out of the scheme only if they sought financial advice.
Ralph Stewart, Founder and Chief Executive of Lifetime Retirement Income expressed deep concern at the proposal.
“The accumulated saving of KiwiSavers belongs to KiwiSavers not the Government. Suggesting savings could be automatically redirected at age 65 has the potential to destabilise the confidence that has been earned by the KiwiSaver scheme.
A key element of the KiwiSaver scheme which was set up under the PIE rules, was to allow each and every KiwiSaver to have their own individual savings account to do with as they wish when they reach retirement.”
Stewart said, “while there is very real gap between New Zealand Superannuation and an acceptable level of retirement income for many New Zealanders, the answer is not forcing savers to accept a regular income. Instead, the answer lies in providing simple retirement income options. Ultimately lifestyle in retirement is a personal choice and should never be imposed on KiwiSavers.
The model already exists today in the way in which KiwiSaver providers offer multiple investment options, all the providers have to do is provide multiple retirement income options that members can accept or reject when they retire. There is no need to force KiwiSavers into a government owned schemed that they have to opt out of.”
In Australia the Government's My Retirement frame work (2018) has been developed which requires KiwiSaver equivalent providers to offer retirement income options in their superannuation schemes. There is no default option imposed. The only obligation is for providers to make options available to members to use as they see fit for their individual circumstances.
After responding to an application from the company Stewart established in 2012 - the Reserve Bank of New Zealand developed the minimum standards for providing a guaranteed retirement income in New Zealand. The standards have been set within the New Zealand regulatory frame work. The standards can be accessed by all KiwiSaver providers making the provision of retirement income options for their members a simple and straight forward option.
Simplicity KiwiSaver is already providing these options to members as part of a comprehensive low-cost scheme that will support members while both saving for retirement and spending in retirement. The Simplicity scheme offers members both low cost savings options and one of the lowest cost guaranteed income options in the OECD.
Stewart said, “ KiwiSaver is a fantastic scheme that helps Kiwi’s accumulate a savings balance to support individual retirement options. To reduce these options or to enforce income options is simply not KiwiSaver.”
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Comments from our readers
Perhaps a few people could make inquiries of the U.K. Government as to WHY their scheme was scrapped.
However, one suspects that after the first few stories of people blowing their Kiwisaver balance by age 67 emerge, calls to protect the public from themselves will become louder and more frequent.
Some people "blow" their income on depreciating assets like cars, boats and other expensive things. Should we protect them?
If someone chooses to use their kiwisaver to buy a nice car, or a holiday, or to retire debt who are you to judge whether that is wise?
1. NZ's obsession with property and the ability to redirect retirement savings for this purpose,
2. the future social impact of conservative bias meaning that many Kiwisaver contributors will fall short of having enough for their retirement, and
3. the fact that any government will find it increasingly difficult to keep their hands off the growing pot of contained retirement monies accumulating within Kiwisaver schemes.
Whilst all of these will have significant butterfly effects, it is the last point that will (ironically) unpin the advice industry - as consumers look to minimize the impact of future government tinkering.
It's a slippery slope to say at retirement abdicate control of your assets, what then, 50 year olds having a midlife crisis can't buy red two door soft tops?
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It is the only thing that really concerns me with Kiwi Saver is that any Government can change the rules at a whim and who in their right mind would trust politicians.
We have seen evidence of their past behaviour where they have pulled more strokes than the Cambridge & Oxford rowing club combined.