KiwiSaver

Speech notes for launch of KiwiSaver publicity campaign, Holiday Inn, Featherston St, WellingtonKiwiSaver is a landmark in New Zealand’s economic and social legislation and I welcome this campaign to introduce it to working New Zealand.

One standout feature of KiwiSaver’s design is its simplicity. It makes it easy to join, easy to administer, easy to take with you when you change jobs…and, because of the government’s contribution, KiwiSaver makes it easy to building the savings you need when you retire.

So because KiwiSaver is a simple scheme for savers, it’s an easy message to communicate, and I believe this campaign will be more successful as a result.

One of the biggest problems we have with getting people to save is getting people interested. Most of us know by now that we need to have some financial assets put aside when we retire if we want to enjoy a standard of living comparable to our working life. But we put off the job of saving because we tell ourselves we have higher priorities. Retirement seems a long, long way in the future – until one day suddenly it isn’t. (Although, in my case, there are quite a few years to go yet…).

As a result, not enough of us are saving – especially in the groups who need help the most. A survey of household savings in 2001 showed only a low proportion of kiwis in low and middle earning range (of $15,000-$50,000 then) had any financial assets at all – just 15% of individuals and 17% of couples in that earning bracket.

The way to get people engaged is to get them started in a regular programme of saving.

And the campaign around KiwiSaver will build the interest and help to engage the interest of kiwis at work in getting started.

When not enough of us are saving there are real effects on individuals directly, through a lower standard of living in retirement. And it has real effects on the wider economy, which in turn affects the wellbeing of all New Zealanders.

When we are spending more than we save – as much as $1.15 for every dollar we earned last year, according to one measure – inflationary pressures are higher, interest rates are higher, which puts pressure on our exchange rate and our exporters.

So anything that helps to increase saving helps us all.

Not everyone will sign up to KiwiSaver on day one, when the scheme starts on the first of July. I would be surprised if people didn’t look at their current commitments and wonder where they are going to find 4% or 8% of their gross salary.

But we know that around 700,000 kiwis change jobs every year, and they will be automatically enrolled then (with the option to opt out within 8 weeks). Most often, people expect their salaries to increase as they change jobs, so there will be more room to put something aside.

Others might decide to join as they pay off hire purchase liabilities and so on, instead of taking on more debt.

Others will join the scheme as they receive their normal wage increases.

I’ve been encouraged since the budget that many employers and most unions are making positive noises about supporting working people into KiwiSaver.

The Stock Exchange welcomed the scheme immediately, and major employers are indicating KiwiSaver works for them – employers like innovative international kiwi company Gallagher Animal Management Systems, and our biggest tourism company, Tourism Holdings.

And last week Air New Zealand announced it would contribute the full 4% of the matching employer contribution from next April, three years earlier than required. That’s very heartening and I am confident more employers will see KiwiSaver as a smart way to encourage greater loyalty and to recruit and retain skilled staff.

And it’s not just a simple, effective scheme for big employers; it’s a low cost, off the shelf super scheme for smaller employers as well. I was reminded of this last week when I visited an innovative irrigation technology company on the Kapiti Coast. One of the owners told me, ‘”I want the very best for my employees. If it encourages them to be better off, then I am all for it.” That’s a great attitude.

I was interested to read comments from members of the public who were shown previews of the publicity campaign. They made comments such as, “They make it easy – one less thing to worry about-…and – No matter what the day throws at you – your KiwiSaver will be safely ticking over”.

If we foster those attitudes, we will overcome one of the big hurdles in the way of lifting our saving – the motivation to get going, and the feeling that it’s too hard.

It remains for me to congratulate everyone involved in the campaign, from IRD and Saatchis Wellington especially.

When they were given the brief to go out and design this campaign, they thought they were working with the original design of KiwiSaver. I can only imagine how stressed they must have been on budget night, when they realised KiwiSaver was being very significantly boosted – but still starting on the same date. With a bit of work in the edit suites, they have come through with the campaign on schedule, and I would like to thank everyone who got that work done quickly.

The advertising campaign begins tonight during the six o’clock news on TV One. There’ll be newspaper ads from mid June, with tie-ins to radio and online advertising.

This is a big campaign. It’s big because this is a very big and very important initiative. It affects every single New Zealander, because it affects our economic and social future. And it affects every working New Zealand because we all have decisions to make about how we will save for our retirement.

In decades to come as retirees use their KiwiSavings, I am sure television nostalgia programmes will look back to this day, to the day it all began, and they will play the first KiwiSaver tv commercial.

So we are making history here, and I welcome the beginning of history tonight, with the launch of this campaign.

Today’s launch of the first KiwiSaver television commercial marks another important milestone in helping New Zealanders save for their future, government ministers said today.”With just five weeks to go before KiwiSaver launches on 1 July, the campaign will help focus people’s minds on the opportunities the scheme offers to secure their retirement dreams,” said the ministers.

“We need to lift our savings for our own long term financial security, but also to build a stronger economy and fairer society,” said Cullen.

“KiwiSaver is the most important initiative in a generation to change our savings habits and the measures announced in Budget 2007 make it even easier for New Zealanders to take steps today to safeguard tomorrow.

The government is supporting saving by contributing $40 a week in tax credits for workers and employers. Employers will also have to provide a matching 4% contribution phased in over four years from 1 April 2008.

“The campaign line is ‘KiwiSaver. Making easy work of saving.’ This goes to the core of the design of KiwiSaver – work-based, simple and accessible to the widest range of the working population,” said Peter Dunne.

“The multi-media advertising campaign for KiwiSaver kicks off tonight with the first advertisement airing on TVNZ during the One News. This aims to tell every New Zealander more about KiwiSaver.

“A second advertisement, which will run from 24 June, targets people who are starting work or changing jobs. Some 700,000 people change jobs every year and new employees are automatically enrolled. This is a key design feature because it makes the decision to save that much easier. You have to make a conscious decision not to save and opt out.

“A third television advertisement will air in October 2007 and targets those who will need to opt in to KiwiSaver (existing employees and self-employed people).

“Print advertising begins mid June with metropolitan, regional and community newspapers tying in with online advertising on key internet sites, general print advertising, radio and ethnic media placements.

“We are helping people make an informed choice about what is an important financial decision,” said Lianne Dalziel. “Employees will also receive information packs and a comprehensive ‘how to’ guide is being distributed to employers.

“We are confident KiwiSaver will make a real difference to savings habits so New Zealanders can look with confidence to a retirement that meets their aspirations.”

In the wake of the Government’s budget announcement yesterday, TOWER Investments CEO Tony Hildyard said today that he was pleased that the new Government initiatives have both raised the profile of KiwiSaver and made it more attractive to investors. But although it was positive that people were now talking about KiwiSaver, he felt concerned about some comments that had been made that weren’t factually correct. “It’s great that we’re debating the merits of KiwiSaver because people are really starting to see the positives and think about the opportunities it provides. What we do need to look at is some of the misinformation that’s out there and make sure people are given the information they need to make a good decision about whether or not to sign up.”

Specifically, Hildyard said he felt that some financial commentators didn’t seem to understand fiduciary responsibilities of KiwiSaver fund managers, trustees and sponsors, and that some of the information being presented was factually incorrect. He said that this was particularly evident in a radio interview with Gareth Morgan this morning.

“There has been some confusion about the roles of the fund manager and the sponsor. The sponsor of the product, the party who brings the product to market, doesn’t have any fiduciary obligations to investors. It is the fund manager and the Trustee who have these obligations.”

Hildyard said that while it was true that there was no Crown guarantee for any KiwiSaver product, fund managers such as TOWER have obligations at law and under their trust deeds, and TOWER has obligations for any losses that arise from “willful or negligent default”, breaches of trust or dishonesty.

“You can’t provide any superannuation or managed fund product and not take responsibility. That goes for KiwiSaver as well. Our trust deed sets out these obligations very clearly, and we stand by them.”

Hildyard said that he took issue with Morgan’s comments on fees and returns and his claim that investors would be lucky to get 40% of the return on their money. Hildyard said this isn’t always true, and cited TOWER’s Balanced Fund (one of TOWER’s KiwiPlan funds) as an example. The fees on this fund averaged at less than 10% of the after-tax returns.

Another important point was that under KiwiSaver, all providers’ fees (including Morgan’s scheme) have been negotiated with the Government Actuary. “And going back to the budget announcement, now that these fees are subsidised, they are becoming less and less relevant.”