Greens' proposal will increase KiwiSaver nest egg

The Green Party is proposing to boost the value of KiwiSavers' retirement nest egg by creating a 'public option' provider that will give savers tens of thousands of dollars in fee savings over the lifetime of their investment.

"A significant part of New Zealanders' savings get eaten away by costs and fees. By offering a public KiwiSaver option, we can lower costs sizably, saving tens of thousands of dollars," Green Party Co-leader Russel Norman said today.

"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).

"We will do for superannuation, what Kiwibank has done for banking. We will ensure there is a value for money public option.

"The public fund can achieve significant fee and cost reductions through greater economies of scale.

"The fund will be managed by the Guardians of the $16 billion New Zealand Superannuation Fund while Kiwibank or the Inland Revenue Department can provide the front-end management of individual KiwiSaver accounts."

The recommendation for a single default provider was made by the Government-appointed Savings Working Group in January of this year. The Australian Government announced similar but more sweeping changes to their superannuation industry in September this year.

"If National and Labour are going to require people to make greater contributions to their KiwiSaver funds, the Green Party is going to add value to New Zealanders' KiwiSaver scheme by reducing the fees and costs they face," Dr Norman said.

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 account will result in a bigger nest egg on retirement of anywhere from $23,000 to $142,000.

"A public KiwiSaver option will intensify competition in the superannuation industry, driving down costs." Dr Norman said.

"Like Kiwibank, the public fund will be New Zealand owned, managed in an arms-length, commercial way, in the interests of the New Zealand economy."