A public option for KiwiSaver will reduce fees, saving KiwiSavers tens of thousands of dollars over the lifetime of their investment, the Green Party said today.
KiwiSaver research company Canstar released a report today showing KiwiSaver fees are rising faster than inflation. Canstar says a few dollars in fee savings can add up to a substantial difference over the life of an investment, and your retirement savings.
"The Green Party is going to add value to people's KiwiSaver scheme by reducing the fees and costs they face," Green Party Co-leader Dr Russel Norman said today.
"We are going to do to superannuation, what Kiwibank has done for banking."
"A public KiwiSaver option will intensify competition in the superannuation industry driving down costs.
"A significant part of KiwiSavers' savings is being eaten away by high and rising costs and fees. By offering a public KiwiSaver option, we can lower costs saving tens of thousands of dollars.
"If these savings are reinvested, KiwiSavers' nest eggs will be significantly higher, up to $142,000 higher in some cases ($64,000 in today's dollars)."
The recommendation for a single default provider was made by the Government's own Savings Working Group. The Savings Working Group estimates that a single large provider can reduce the costs of KiwiSaver by a factor of two-to-three. A 40 percent saving in costs and fees over the lifetime of a typical KiwiSaver will result in a bigger nest egg on retirement of anywhere from $23,000 to $142,000.
"The public fund can achieve significant fee and cost reductions through greater economies of scale. The fund can be managed by the Guardians of the $26 billion New Zealand Superannuation Fund while Kiwibank or the Inland Revenue Department can provide the front-end management of individual KiwiSaver accounts," Dr Norman said.
"Like Kiwibank, the public fund will be New Zealand owned, managed in an arm's length, commercial way, in the interests of the New Zealand economy."
Link to Green KiwiSaver background paper: