“It must be remembered,” the PR-attenuated Simon Power commented in his ‘fast-track’ release this week, “that though KiwiSaver was set up by government, risk is inherent in investment decisions, and those investments are not guaranteed by government.”
It’s incredible Power has to keep peddling this message; it shouldn’t need saying anymore. But I suppose it does. For example, I heard Kathryn Ryan on Radio New Zealand on Wednesday morning insinuating something of the sort.
But, in fact, the Labour government, which introduced the scheme, never promised to be the KiwiSaver scheme of last resort. That would be a crazy expectation anyway.
This slightly unhinged comment from investor lobby group EUFA, sets the tone: “A report today that KiwiSaver is a “safe bet” is to be feared. “Bet” relates to gambling, which is what investors are currently doing, unknowingly, when they invest their savings in KiwiSaver.”
This is not necessarily untrue: investing is a kind of gambling, albeit over longer-time periods than your average horse race and with more rules than ‘don’t hit the animal too much’.
In essence, with KiwiSaver, the government is encouraging “mum and dad investors”, as Power referred to them, to take a punt. The problem is, it hands mum and dad $1,000 and leaves them to it with little guidance on how to understand the odds or follow the race-call.
I do hope Power’s “fast-tracked” changes “to ensure the integrity of KiwiSaver” eventuate in something workable for both monitoring schemes and ensuring mums and dads everywhere can place their bets with confidence and accept the result without moaning.
Paul Mersi, financial services specialist with PricewaterhouseCoopers, told Ryan on Radio NZ that it should be simple enough for KiwiSaver providers, and all financial product manufacturers for that matter, to create short documents clearly explaining, even to mums and dads, the inherent risk in their investments.
Bring on the KiwiSaver form guide.
Tags: David Chaplin
I wonder which risks Paul was referring to…currency risk, default risk, interest rate risk, credit risk, duration risk, liquidity risk, company risk, equity market risk, manager risk, asset sector risk, shortfall risk, geo-political risk, or risk of fraud, mis-management, error or ommission? Good luck with the short form guide.
The biggest risk remains poor investment decisions being made by ill-equiped investors with insufficient knowledge and this is all to easy with the transferability and allowance for contribution holidays in KiwiSaver.