KiwiSaver ‘shouldn’t be only scheme with perks’

The Government should think about offering other tax-advantaged investment vehicles if it wants to break New Zealanders’ focus on residential property, says Rebecca Thomas, chief executive of Mint Asset Management.

She said it was currently a hard sell to promote managed funds, when it was KiwiSaver stacked with incentives.

Data from Milford shows that over the scheme’s first 10 years, savers invested $17 billion of their own money but received another $10b in employer contributions, $8b government contributions and $11b of investment returns.

Having another tax-advantaged scheme would encourage saving and boost the local funds management industry, Thomas said.

She pointed to Britain’s PEPs and ISAs, which she said had helped to significantly boost retirement incomes as well as provide people with the means to save for other things, such as a house deposit.

There, savers are allowed to put away income on which tax has already been paid, up to a maximum cap, and pay no tax on its growth.

It would also be a better option than KiwiSaver for those saving for a first house. 

“With KiwiSaver it’s a very mismatched concept, having the ability to withdraw for a house purchase when KiwiSaver is designed to be a locked-in scheme. That should be untouched and just grows over time.

“I spoke to the new minister of commerce about this before Christmas. The success of KiwiSaver paves the way for looking at non-locked in investment scheme,” she said.

“Investment in in non-KiwiSaver managed funds has been helped by the growth of KiwiSaver but there is a long way to go before other financial savings become meaningful. The benefits to investors, though, are the availability of liquid investments they can realise as needed or retained as a more flexible addition to retirement savings.”

Mint recently took over the contract to manage BNZ’s KiwiSaver investments, from Harbour and Devon. That will happen from March. It is Mint’s second KiwiSaver client, after AMP.

Milford Asset Managemtn chief executive Troy Swann said the KiwiSaver scheme’s incentives did attract working-age investors.

“But for many people, saving only 3% of their salary in a KiwiSaver fund likely won’t be enough to fund a comfortable retirement. Therefore, people should also be saving and investing outside of KiwiSaver if they can afford to. For example, at Milford we have KiwiSaver Funds, PIE Investment Funds and our Private Wealth service, and many of our KiwiSaver clients invest their additional savings in our PIE Investment Funds and our Private Wealth service.”