Plans to launch a government-run, capital-guaranteed KiwiSaver scheme have collapsed after flopping at the select committee phase.
Last week the Economic Development, Science and Innovation Committee recommended binning the KiwiFund legislation, which was a key policy initiative of Labour coalition partner, NZ First.
The KiwiFund legislation was shepherded into parliament last December by NZ First deputy leader, Fletcher Tabuteau, as a private members bill. Under the proposed law, the government would’ve appointed an expert panel to investigate existing KiwiSaver practices and design a state-run scheme.
KiwiFund passed its first reading this February before heading off to a select committee chaired by Tabuteau.
After considering advice from bureaucrats and 23 submissions, Tabuteau “has indicated that he wishes the bill to be withdrawn”, the select committee report says.
“[Tabuteau] is confident that the issues the bill seeks to address will be dealt with through other avenues. Accordingly, we recommend that this bill not proceed,” the report says.
While the bill garnered support from the public, most of the industry submissions opposed the KiwiFund concept citing several reasons.
“Industry and financial service providers were broadly opposed to the bill, stating that the current accountability and scrutiny of fees is sufficient,” the select committee report says. “These submitters expressed apprehension that establishing a government owned and guaranteed KiwiSaver scheme could undermine competition and increase concentration of risk in the sector.”
Some submissions also pointed out that a capital-guaranteed government KiwiSaver scheme could leave taxpayers on the hook for a “significant potential liability”. Furthermore, the proposal for KiwiFund to favour local investments would increase risk and lower diversification, industry submissions argued.
“Many submitters also opposed the idea of making ethical investments mandatory,” the report says.
Originally floated by NZ First leader, Winston Peters, in 2013, KiwiFund was an election ‘bottom line’ for the party prior to the September 2017 election.
The proposed expert panel would’ve been charged with examining “the accountability requirements of current KiwiSaver providers relating to fees and investment practices”, the report says, and advising on how to build a “government-owned and operated KiwiSaver provider”.
“KiwiFund would provide people with the option of choosing a KiwiSaver provider that is ultimately accountable to New Zealand taxpayers,” the report says.
The government is already the ultimate owner of one KiwiSaver scheme via the NZ Post/ACC/NZ Super subsidiary Kiwi Wealth.