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From 2019-23 KiwiSaver Fund Managers took $3.1 billion in fees from the accounts of savers. The new Coalition swore its primary job was to reduce the cost-of-living that is blighting so many lives. So what is it waiting for? Take on the supermarkets. Break up Fletcher Building that can't make a buck even though its a monopoly. Slash the rip-off fees of Big Banks. The time for cowardice is over. All of government should now be directed toward enhancing competition. How else is the cost-of-living going to fall? How can Kiwis function when the game is stacked against them? Take this latest example taken from page 12 of the Financial Markets Authority (FMA) Kiwi Saver Annual Report 2023:

Focus area - Value for money

Value for money in KiwiSaver does not mean fees must low.

That's untrue. Value for money in KiwiSaver damn well does mean fees should be low. Let's call that headline in the FMA's report out for what it is - bald faced misinformation that is to the detriment of savers and to the benefit of the fund managers. If the Board of the FMA won't defend the public interest by writing such outrageous lines then the whole lot of them should be sent packing by the new Coalition. There are thousands of articles by the world's leading finance gurus proving that what the FMA writes above is nonsense. A good place to start is Eugene Fama, Professor of Finance at Chicago University who won the Nobel Prize - he's ranked as the 9th-most influential economist of all time & is regarded as "the father of modern finance". Here is part of an interview he did:

FAMA: "Active management in aggregate is a zero-sum game - before costs. Good (more likely just lucky) active managers can win only at the expense of bad (or unlucky) active managers. This principle holds even at the level of individual stocks. Any time an active manager makes money by overweighting a stock, he wins because other active investors react by underweighting the stock. The two sides always net out - before the costs of active management. After costs, active management is a negative-sum game by the amount of the costs (fees and expenses) borne by investors".

FAMA: "After costs, only the top 3% of managers produce a return that indicates they have sufficient skill to just cover their costs, which means that .. even the top performers are expected to be only about as good as a low-cost passive index fund. The other 97% can be expected to do worse. [Consequently] an investor doesn’t have a prayer of picking a manager that can deliver true alpha".

Nearly every KiwiSaver Active Provider will underperform the market over time, after fees. Of the very few that do outperform, the extra return will be taken in fees - you won't see a buck of it. In other words, the $3.1 billion of fees that Kiwi Saver providers sucked out of NZ'ers over just a five year period is a big, fat rip-off. The FMA board should be fired for stating the industry is "value for money" when it is not. Put your funds with a low cost passive index fund costing no more than around $50 a year and ignore the FMA.


Here's why not a single one of our political parties is in a position to solve NZ's most pressing economic issues:

1. Labour has revealed itself to be consistently in favor of big government and crushing regulation. Its over-eagerness to lock-down Aucklanders indefinitely symbolically positioned Labor as the Party of Oppression. These past 6 years, Labour has shown itself to have some wonderful ideals, like zero poverty, zero net emissions & zero hate, eloquently expressed in soaring poetic speeches written by platoons of PR, marketing & Comms experts, but empty of any practical way of delivering them. When it comes to implementation, Labour appeals again & again to more taxes & more regulation - the latest being wealth & capital taxes.

2. The NZ Green Party loathes free markets & economic prosperity, which it blames for environment degradation. It wants to make everyone equally poor. The fact that the only long-term way to avoid bad environmental outcomes is new technologies invented by private companies which allow power to be generated with few carbon emissions eludes the Greens. The Party's primary ambition is to kill capitalism, not save the environment.

3. National is a conservative party. It refuses to contemplate the large-scale changes needed to shift NZ to a country of high savings, high investment & high productivity. The Party never liked Kiwi Saver. A guy called John Key stated when it was first debated in Parliament in 2006, "There are many problems within Kiwi Saver .. National will not support Kiwi Saver. We do not think it will work ..". After it was enacted over his protests, funds under management were $6 billion in 2010. They're now nearly $100 billion. National will also never support the build-up in privately-provided competitive health-care services required to save our health system. It will not support the break-up of monopoly power rife in NZ. National always has been, and still is, a pro-business, not pro-market, political party. It is not pro-consumer.

4. ACT has no solution to NZ's welfare problems. The only way a right-wing party can help solve them is to be pro-strong families, which ACT is not. It is a classically liberal party. Weak families mean high truancy, high crime, weak education & large numbers of folks isolated on their own, which require welfare to clean up the problems. Yet ACT barely recognizes the family as being the vital institution that nurtures the young. It is only with strong family support that you can get away with the low State support that ACT desires. Weak families lead to higher welfare spending as the social problems they create proliferate. So ACT's views on taxes & welfare make no long-term coherent sense.

5. Last but not least, NZ First is happy to stand-by & support the worsening of NZ's fiscal situation by not supporting measures it perceives will weaken the power of the elderly and strengthen the young. For example, it has ruled out any change in retirement age. However, in the face of an ageing population, an entirely new system of institutions for NZ, including Singapore-style retirement & health savings accounts, is needed to solve our problems.

So my view is that we should not be tricked into thinking any savior currently exists in our current political landscape. Labour was so bad, it had to be voted out, so anything is an improvement upon that lot as they currently exist. But as for the present Coalition sorting out NZ's long-term structural problems, whether it be fixing Auckland or our welfare system in the face of an ageing population, none of the parties comprising it even come close.


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Robert MacCulloch

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