When Helen Clark and Michael Cullen introduced Kiwisaver in 2007, the best thing about the scheme was that it was independent of government interference. Sure, contributions are collected by IRD, along with other payroll deductions if you are an employee, but the contributions are then transferred to your fund untouched. I had a number of clients at the time say they refused to go into Kiwisaver because they didn’t want the government meddling with, or confiscating their retirement savings. I told them that couldn’t possibly happen; IRD collecting the contributions was merely a convenient way of paying into your fund, and anyway, if you are self-employed, as many were, then you pay your contributions directly into your fund yourself.
What a naive fool I was.
The government is revamping KiwiSaver rules to ban investing in fossil fuels and illegal weapons, and improve investment returns.
Commerce Minister Kris Faafoi said banning investment in fossil fuel companies would help combat climate change and carbon emissions.
“It also makes sense for the funds themselves given that there is a risk of investing in stranded assets as the world moves to reduce emissions.”
So the government now knows more about fund management and investments than fund managers do? I think not.
The default funds will also be banned from investing in companies making land mines, cluster bombs, and other illegal weapons.
KiwiSaver default funds are allocated to people who do not make a choice when they join the retirement savings scheme.
There are currently nine providers, including the four big banks, and their licences expire in 2021.
RNZ.
So we are now saying that Kiwisaver funds are banned from investing in companies such as BP, Shell (and presumably the publicly listed Z Energy), Mobil, Caltex… even though they produce products that most of us use on a daily basis? Doesn’t this strike you as somewhat hypocritical?
Also, avoiding the companies mentioned above is probably straightforward, but in fact, it is not quite that simple.
What about ANZ, BNZ or Westpac, with their huge loans to Australian mining companies? As one commentator put it to Newsroom: “A decent whack of KiwiSaver funds are going to Australia and if you are investing in Australian banks you are knee deep in fossil fuels.”
What about companies that are huge users of (and therefore encouragers of) fossil fuels production? Toyota or Volkswagen, the world’s largest producers of fossil fuel-driven cars; Fonterra, whose coal-fired milk processing plants make it one of the country’s top CO2 emitters; Air NZ, whose search for alternative fuel sources hasn’t come to much so far.
Newsroom.
It seems like all we can do is invest in farming support companies like Wrightsons – oh wait – don’t they use large trucks to transport their products around the country? Can’t go there. OK then – how about Steel and Tube Ltd – a nice safe NZ company. But… don’t they use coal in steelmaking? Can’t go there either. Never mind. We’ll go with Contact Energy Ltd… that owns part of the Kupe gas field. Can’t go there either.
In fact, I challenge you to think of a single company to invest in that doesn’t rely on fossil fuels somewhere along the line.
It seems unlikely that any fund is going to be able to steer completely clear from fossil fuel users or emitters, and needless to say, the government’s guidelines are typically vague about how the new rules will be applied.
A much bigger worry is the question of how such restrictions will hamstring the performance of such funds. Until now, we have left the management of Kiwisaver funds to fund managers, as these experts are, strange though it may seem, the best qualified to handle the funds and to get the best returns from them.
The government knows best, of course. Silly me.
The answer to this is simple. If you are in Kiwisaver, make sure you are not in a default fund. That way, you can burn as much fossil fuel as your fund managers will allow, and invest in companies that produce good returns, not those that an ideologically driven government decides are not good investments.
The funds will also not be allowed to invest in companies that produce ‘illegal weapons’, such as land mines and cluster bombs. Okay. I can understand that, I suppose. But here’s the thing. Let’s talk about Lockheed Martin. They produce weapons, and as such may well be considered an unethical investment for Kiwisaver funds. But they also produce rescue helicopters, GPS systems, pilot training systems, train managements systems and even fire control helicopters. So, we shouldn’t be investing in any of those products?
You can see how ridiculous this whole thing will become.
For me, however, the bottom line is this. Your Kiwisaver funds are yours and yours alone, and only you should have the right to decide where they are invested. The Government should not under any circumstances be meddling in people’s retirement savings, as this will distort the market. Many people are in default schemes, and some may be in a default scheme by choice. It could also be that existing funds of choice may become default funds, as the government forces default funds into the category of ‘balanced’ funds. The role of the fund manager is to get the best returns for their investors, and nothing else. They do not, and should not, have to pander to an ideologically driven government that is failing on every front so far.
Once again, Nanny State knows best. Of course, it does.
Comrade.
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