KiwiSaver Bill

The debate on Part 5 includes debate on schedule 3.

We are led to believe that the Labour Government cares so much about the KiwiSaver Bill. Well, the all-powerful Finance and Expenditure Committee that I sit on is chaired by none other than Shane Jones.

💬 Lindsay Tisch: Who?

Shane Jones is the chairman of the Finance and Expenditure Committee. I have not heard Shane Jones take one call tonight. Interestingly enough, the Labour Government cares so much about KiwiSaver that Shane Jones has not fronted up to the Committee and taken one call. Why is that? Because Shane Jones does not recognise the bill from when he was shepherding it through the select committee. It has changed so much from the time it left his careful hands that he has not recognised it. I told myself that Mr Jones could be a little too tied up to make a speech tonight—although he is in the Chamber, and we hope that he will take a call later on.

Then I looked to the next, more senior, member of the select committee from the Labour Government, Mark Gosche. I asked myself how many calls Mark Gosche, a former Minister of the Crown who sits on the Finance and Expenditure Committee, has taken tonight. Zero—not the number of dollars that the Labour Party took when it bought the election with $882,000 worth of taxpayer dollars. Mark Gosche, a senior member and a former Minister of the Crown, has taken zero calls.

We then have the next select committee member for Labour, Paul Swain. He is a former member of the Crown and a senior member of the select committee. How many calls has Paul Swain taken on this bill tonight? Zero! Then we come to the next member of the Labour caucus who sits on the Finance and Expenditure Committee, George Hawkins, also a former Minister of the Crown. How many calls has George Hawkins taken on this bill? Zero! So here we have it.

The Labour Government cares an awful lot about KiwiSaver. Apparently, it is the biggest thing that has ever hit since sliced toast. Michael Cullen paraded before the kiwi with the very long beak, and Labour members care so much about the scheme that none of the members Shane Jones, Mark Gosche, Paul Swain, and George Hawkins have come to the Committee tonight to give a speech on it. I tell Mr Jones—who is in the Chamber tonight—to go to his seat, stand on his feet, defend KiwiSaver, and tell us about the changes that occurred to the bill when it left the select committee and before it came down to the floor of the Chamber. Mr Jones cannot recognise this bill. That is why he has not taken a call, and I predict that he will not take a call. He cannot recognise the bill.

Part 5 of the bill, I think, has a very interesting situation. It is about investment statements and about giving investment advice. This provision was put in because the Prime Minister of New Zealand, the Rt Hon Helen Clark, has had a lot of difficulty when it comes to investment advice. New Zealanders will remember that she told them: “Do not sell your Air New Zealand shares. Hang on to them for a little bit longer.” Actually, I hope people did not hang on to those shares for too long because, fundamentally, they have not been doing all that well.

The Prime Minister is in good company because, about 6 weeks ago, another member of the Crown—David Cunliffe, the Minister of Communications—went out and told Telecom that its dividend policy should look radically different from the dividend policy it has today. So that is why clause 183 in Part 5 talks about investment advice.

Clause 182 is very interesting, as my colleague Katherine Rich pointed out. It states that there is no Crown guarantee in respect of KiwiSaver. I make the point that the one thing investors should realise, of course, is if they put their money into KiwiSaver, then they are liable for whatever investment returns are put in. That is standard procedure. They are also liable for the integrity of those funds, and they should choose their adviser very carefully.

Again, the process to support the default providers and the quality of fund managers in New Zealand does not concern me, but I just make the point to New Zealanders that they should not be under any illusions. When they put their money into a KiwiSaver scheme, there is no guarantee for those schemes, and there is certainly no guarantee on a return. I think it would be very wise for them to make sure they choose their provider well, they consider that situation fully, and they make sure their provider is the one they believe can produce the best return for them. I believe that return will be very, very important, because so many investors will have such small balances in their account, every dollar will matter.

First of all, when the member John Key tells New Zealanders correctly that there will be no Government guarantee involved with KiwiSaver, it appears to me that since National is voting against every part of this bill so far, it intends to actually vote against the KiwiSaver Bill. So I would like to point out to New Zealanders that if that is the case, there will be no guarantee that KiwiSaver itself will continue if there is a change of Government.

💬 John Key: That’s right; there is no guarantee.

Mr Key has confirmed that that is the case—that National would look at scrubbing the whole thing. I think it is quite good to have that on the record, so that people clearly understand that they will be given a real choice in relation to this bill.

I would like to go, though, to new clause 194A, which has come in under Dr Michael Cullen’s Supplementary Order Paper 52, relating to the mortgage diversion facility. As others mentioned in the second reading debate, this change to the bill was promoted by United Future, and by myself in particular as its spokesperson on finance and revenue. So let us just get the record straight.

Far from doing a back-room deal on this, I actually took the suggestion to the Finance and Expenditure Committee. I laid it out to members as best I could, with back-up papers, diagrams, flow charts, and all the other things that they would need to make a decision on it. National is completely wrong in saying that the select committee unanimously rejected the mortgage diversion facility. That is not correct. It was voted for by United Future, it was voted for by the Green Party, and it was voted for by the Māori Party. So let the record stand corrected in that regard; that was the situation. It is true that subsequently I entered into discussions with the officials to whom the Government had signalled its intent, which was clearly signalled in the commentary on the bill, that the bill merited further work and further consideration. The result of that is the Supplementary Order Paper that members now have before them.

I believe that this is a very, very important improvement to the design of the KiwiSaver scheme. It will have manifold advantage from the point of view of investors. For example, we were told in many submissions that the fear was that people would invest for 1 year, get their $1,000 reward from the taxpayer, and then take contribution holidays for maybe 25 or 30 years while they paid off their mortgage. This mortgage diversion provision, on the other hand, ensures that those people will contribute to KiwiSaver continuously. It is very, very important that they do, because only by being in KiwiSaver will they be eligible for top-ups from their employer. If they are not in the game, they are out of the game completely.

Mortgage diversion creates an opportunity for people to stay in the KiwiSaver game in order to get their $1,000 subsidy and whatever their employer decides to top up for them, and at the same time to use up to 50 percent of their own personal contributions to service mortgages. As I said earlier, that is holistic, because it means that people can end up in retirement with a freehold home and with a reasonably tidy sum invested to help them supplement the level of New Zealand superannuation, which by any standard is going to give people only a very basic income, indeed. In particular, a person who is still renting a house will not be able to survive on New Zealand superannuation—cannot survive. So it really is a very, very important measure. It will assist literally hundreds of thousands of savers in the years to come to accomplish those two goals of ending up in retirement with a freehold home, and at the same time ending up with a tidy sum put away to invest for their retirement. Therefore, it really increases enormously the retirement security of New Zealanders.

Furthermore, of course, it will swell the base of capital funds in New Zealand, and the availability of that pool of funds—as we have seen in Australia, in Singapore, and in other jurisdictions—so that New Zealand companies can more readily access the capital they need to grow their businesses. Instead of having a continuous line of Australian companies taking over Kiwi companies, maybe we will even see some reverse of that, and we will grow our economy to be strong enough to actually diversify overseas and become an ownership-based society. That is one of United Future’s central goals in all of our policy. We want to see a genuine ownership-based society built in New Zealand, so that we have a stake in our future and in our prosperity. We want that spread right across the whole of our society.

I am very pleased tonight to take some credit for the mortgage diversion facility. It is an idea whose time has come, and I have no doubt that the mature judgment of New Zealanders, as we move forward into the scheme and see it implemented and unwound, will be that this was a great change to a good scheme.

It has been very interesting to see the transition that Gordon Copeland has made.

💬 John Key: I raise a point of order, Madam Chairperson. I am very sorry to interrupt my colleague Katherine Rich but I think the chairman of the Finance and Expenditure Committee was distracted when you were seeking the call. As we have pointed out, during the entire debate tonight not one Government member has taken a call. The Associate Minister of Finance and the chairman of the Finance and Expenditure Committee are here, and they were obviously distracted. If they believe so much in KiwiSaver, maybe they would like to take a call. It is great to see the Minister on his feet.

The CHAIRPERSON (Ann Hartley): That was not a point of order, and the member knows it.

💬 Hon Trevor Mallard: I raise a point of order, Madam Chairperson. That point of order has no merit. It is clearly a spirited one from the member after dinner and it is about time he was a bit more responsible.

That was exactly the sort of point of order we have come to expect from Trevor Mallard.

It was interesting to hear the two financial mandarins debate across the Chamber, but I am more interested in the transition that Gordon Copeland has made this evening. Earlier on in the debate we said he had had a lot to do with bringing in the mortgage diversion provisions of the bill, and he said it had nothing to do with him and that he was humbled, if not flattered, by the thought that the National Opposition should think he had something to do with it. Now, in his last speech, he said he was happy to take all the credit. So it has been an interesting transition during the debate.

In this part of the bill, the rate of the Government contribution is specified—the $1,000, which is apparently designed to make New Zealanders line up, up and down the country, to take their part in the KiwiSaver scheme. This is also the part that lays out quite complex rules and regulations about how money can be taken out. What interests me is the purpose of this bill, which I will just recap for those who are listening. It is: “to encourage a long-term savings habit and asset accumulation by individuals …”, so that they can: “enjoy standards of living in retirement …”. Likewise: “The Act aims to increase individuals’ well-being and financial independence, particularly in retirement, and to provide retirement benefits.”

If that is the case, then why is it so easy for young people to take their money out after they have been involved in the scheme for only 5 years? If individuals go into the scheme in their 20s, they will be able to have full rights to withdraw large sums when they are nowhere near retiring. If the aim is to encourage people to think seriously about their retirement, then we have to make it harder, not easier, for people to take their money out. The Government thinks that it has brought up a new political idea in mortgage diversion. What the Government has done is create a cheque account. It has made it very easy for New Zealanders to divert their funds and put them into their first home. What is to stop them from selling their first home? We live in a country that seems to have a fascination with property. Most Kiwis do not live most of their lives in one house any more, and are in their first home for probably only a couple of years. This is what this scheme is designed to do. It gives us the opportunity to put money towards our first home and then sell it—to make a bit of money on it and then put it back in our pocket. It is not put away, squirreled away, for our retirement when we turn 65. I know that the Minister of Finance is currently thinking about that. These are the sorts of issues that do concern him.

I am interested in a scheme that will be attractive to younger people. At the moment, if we look at the $1,000 and the wee bit of a tax break, we must ask whether that will be enough to encourage large numbers of younger Kiwis to take up the scheme. I do not know whether it is. I have seen other schemes whereby there was huge incentive, and whereby the Government might match the contribution by $2 to $1, which was the case at the Foundation for Research, Science and Technology, where I used to work, and younger people would still not take it up. They decided they wanted to have more money in their pockets to go out on a Friday night. They were not encouraged to consider long-term superannuation, no matter how attractive, at that time, it was.

What we have here is a scheme that is quite different from what the Finance and Expenditure Committee actually looked at. I am not surprised that some of the Labour members have not taken a call on this bill, because it looks so dramatically different from when they sat around the select committee table. The select committee looked at this bill, and New Zealanders looked at it and thought they were being consulted, then 2 weeks’ later it was dramatically different. That is not due process; that is not the way things should be done. This scheme will not work.

New Zealand First supports Part 5 of the KiwiSaver Bill. We heard before that the Crown will not be responsible, as there is no guarantee on the Crown’s part, for the default providers. I guess that answers the issue I brought up a bit earlier, that it will tend to be the bigger financial firms that will participate in the KiwiSaver scheme. Also, this part outlines—and this is very important—that the employer is not to be the financial adviser or is not to give advice to the employee when it comes to which provider to choose. Sadly, employees will probably have to go off to Craig Foss, once he gets kicked out of Parliament and takes up his advisory role again. That is what will happen. There will not be a situation when, by default, the employer becomes the adviser and he or she is asked to give advice to the employee. I am certainly thankful for that.

Just before, Mr Copeland was taking all of the credit for including the mortgage diversion scheme in the bill. It is no wonder that the public sometimes gets confused, because somebody was taking credit for something that members on the other side of the Chamber have spent most of the night dissing, but that is the way it goes. In the course of that exchange across the Chamber, Mr Copeland suggested that John Key, if ever he could get anywhere near the financial portfolio as a member of a Government, would change this bill. But I suggest that this would not be the case. In fact, I have seen it in print that this is not the case—if we can believe whatever is in print. I do not know whether the president of my party was having a bad dream or what, but I have just seen a whole lot of stuff that he put in print that I could not believe. I am not sure that what I read was correct. I read that Mr Key said it is most unlikely that the National Party would throw out this scheme. I am pleased to hear that, because this is a scheme for the long term. It is a scheme to change the saving habits of New Zealanders, and it should be looked on in that light.

Following that exchange, Mr Foss was talking about the providers. He said the Government had made sure that the default providers would be looked after. He was saying then—and it was a little bit contradictory—that providers would look on KiwiSaver as a loss leader for them to sell other financial products to these people. I say, good, good, and good, because that is what the bill is about. It is about involving people in the financial world who have not been involved hitherto and otherwise would not be. I think it is good that these companies may go on to sell them some insurance or whatever else, or to add to—

💬 Craig Foss: Reverse mortgages!

R DOUG WOOLERTON: Even the mortgage. They could even add to that sort of thing. In relation to the mortgage diversion scheme—and I am trying to cover a lot of things quickly because I transgressed a wee while ago and went over other ground—Mr Copeland said that he took credit for the mortgage diversion scheme. I just want to say that we should not get hung up on one line of thought, because it is possible, preferable, and desirable that people save at the same time as they are paying off their mortgage. If there is a scheme whereby they can have a diversion for a wee while and pay some money to a mortgage and some to a savings scheme, I think that is what happens in real life. Even though it came in at a late stage, even though Mr Copeland will take all the credit for it, and even though the National Party is dissing it mercilessly, New Zealand First will stay staunch and support it.

The other thing I want to mention that may be interesting to people as we go through this consideration is that we have an interesting situation in that the Inland Revenue Department will be taking a huge administrative role. That is not something that is new, but it is something that is becoming increasingly prevalent.

I would like to focus on Part 5, particularly in relation to clause 182, “No Crown guarantee of KiwiSaver schemes or products”, clause 183, “Factual description of, or transmission of information about, KiwiSaver scheme not investment advice”, and clause 184, “Application of Securities Act 1978”. I would also like to touch on clause 194, “Regulations”.

The reason I do that is I want to focus on some of the submissions that came into the Finance and Expenditure Committee, led by Shane Jones, who is across the Chamber. We are certainly looking forward to his taking a call later on this evening. The submissions focus on a number of issues in regard to the financial advice that new members of KiwiSaver will need to seek. The submissions pointed out three things. The first was that the current level of financial literacy in New Zealand is relatively low. I think that all of us would accept that the average guy in the street, when faced with making a decision about this, will have some difficulties and will need to look for some advice. I think even the Minister of Finance would acknowledge that.

The second point that came through from the submissions was that the KiwiSaver information pack should direct an employee to seek financial advice. That is the point I want to dwell on, particularly in regard to employers and their responsibility in regard to the provision of advice to employees under this Act. Whether or not we like it, employees will be faced with a number of decisions in regard to this legislation. A new employee will need to decide whether to opt out of the scheme or to stay in it. Existing employees will need to decide whether to participate in the KiwiSaver scheme. Employees will need to make decisions about mortgage diversion, about contributions holidays, and about which is the best scheme in terms of the risk profile that will attribute to them. Employees face significant financial decisions, and given the fact that submitters to the Finance and Expenditure Committee made it clear that the current level of financial literacy in New Zealand is relatively low, I am concerned about whether the implementation of the bill will cover the shortfall that I see.

And there is a shortfall, because at the end of the day it will be employers at the coalface who largely will be faced with helping employees to make these decisions, whether or not we like it. It does not matter how thick a submission an employee receives, or what default provider applications are put in front of them, or how much financial advice they have, most employees trust their employers—the guys who employ them—and will go to them to make a decision.

That is where clauses 182, 183, and 184 become very important. In particular, clause 182(1) points out: “There is no Crown guarantee in respect of any KiwiSaver scheme …”. That means it is important that employees make a sensible decision about their risk profile, going forward. Clause 183 points out that a factual description of, or transmission of information about, a KiwiSaver scheme is not investment advice. Clause 183 states: “For the avoidance of doubt, the Crown or any other person does not give investment advice for the purposes of the Investment Advisers (Disclosure) Act …”. Why have I dwelt on that point? It is because the Government is trying to say here that, firstly, the Crown is not responsible, but that, secondly, any other person is not responsible. So, at the end of the day, the decision rests with the employee fair and square. I want Dr Cullen, the Minister in the chair, to take a call and let us know where that point will be specifically mentioned in the applications put in front of employees so that employees do truly understand, when they go to their employers to ask them to help with a decision, that their employer is not responsible for the decision that is made.

That point is spelt out in clause 184, “Application of Securities Act 1978”, in subclause (1), which states: “A person is not a promoter”—and I thank the officials for helping me with this point—“or issuer in relation to an interest in a KiwiSaver scheme for the purposes …”. The legislation states there that an employer cannot be held out as a promoter. That is a very important point, because if an employer was held out as a promoter, then that employer could be held liable in terms of any advice given to an employee.

Kia ora, Madam Chairperson. In contrast to the barrage of ill-informed remarks from our colleagues across the Chamber, I wish to say this is brilliant legislation.

💬 Hon Dr Michael Cullen: Barrage is right.

Yes. Mr Copeland did raise with the Finance and Expenditure Committee the issue of whether there should be an improvement to KiwiSaver by way of a mortgage diversion scheme, but no one less than Mr Key announced to all of the select committee members that we had run out of time. As Mr Key left the meeting, I did see him encourage Gordon to pursue his line, and he did give him the dim prospect of helping to fix this bill, in the unlikely event he was ever to occupy the Government side of the House.

Not only is that the case, but I also have a very strong suspicion that the people who are attacking the bill this evening would, in the event that there was some freak of nature or weird event such as a change of Government well into the future, seek to make this measure compulsory. Underlying a lot of the questions of the Opposition members—not as much in the select committee, as in the narrative in the Committee tonight—is their intention, desire, or preference to see KiwiSaver made compulsory. What other conclusion could my esteemed select committee colleague Mr Key have come back with from Singapore? I get a bit disappointed when people dash off to far-flung places and borrow, uncritically, decisions and ideas. This measure is home-grown, which is why it is called KiwiSaver. Like all good policies, it is capable of being refined as we move along on our waka, which is why, although Mr Copeland claims a key role, at the end of the day KiwiSaver is reflective of the bonding that holds members on this side of the Chamber together in a very coherent form.

People up and down the country cannot wait to start their savings scheme, because they remember very sourly that when our colleagues opposite last had the opportunity to govern, they undermined the mātāmua of the House, Winston Peters. In fact, the leader of the National Party at that time campaigned up and down the country, saying that, following Muldoon, we could not have anything approaching a superannuation scheme that had an element of compulsion in it. It took members on the Government side of the Chamber to make progress—and thankfully the members of the select committee saw the value in bringing this measure back, and accepted that it was capable of being improved as we proceeded.

In relation to whether there is a Crown guarantee, of course the decision lies with the individual saver. The notion that an employer will be in a position either to intimidate employees or to falsely lead them shows a very barren approach to what ought to be the ideal relationship between employees and employers. That relationship will only grow as a consequence of both sides joining in the fray and growing the size of the savings pool. In fact, when Labour is still in power in 2012, 2013, 2014, and 2015, we will look back very happily at this evening, when we laid down the foundations for the Kiwi pūtea.

Unfortunately, although we had tit for tat on our committee, not a single original idea emerged from the Opposition. We had the Business Roundtable serve up its usual ideological nonsense that there is no savings problem. Then we had the real experts—people who deal on a daily basis with families—say there is a savings problem and a capital deficit problem.

This bill is a fantastic start, and, like all journeys, it has started with a few faltering steps. But this bill is going places—unlike the Opposition, which is going nowhere. Kia ora tātou.

Part 5 of the KiwiSaver Bill, “General provisions”, which runs from pages 156 to 174, is gripping reading. Like Part 4, it is more of what Labour likes lots of: regulations. Oh, the rejoicing in the Labour ranks and hierarchies—more regulations, a flagship bill.

I have read a description from the National Business Review that states that the scheme is “a soft version of compulsory individual accounts”. There is a view that the scheme is naught but a precursor to a compulsory savings scheme. Well, well, well! Compulsion is what this Government moves to if voluntary systems fail to get 100 percent adherence.

It has always been the same. We have seen it recently with dog microchipping. During that debate it was even suggested that the salmon on salmon farms should be individually microchipped, on a compulsory basis. Well, that did not work out. We have seen it with farm access. A perfectly satisfactory voluntary system of providing access across private property is operating, but is that OK for this Government? No, it must be compulsory. The Government seems intent on delving into all aspects of private life and imposing what it thinks is necessary. When will it occur to the Government that all it is doing is hampering what could be achieved if it backed off from trying to run every aspect of life?

Members should look at the recent economic forecast that came from the West Coast. Members have said I should mention the West Coast, so I shall. This region is benefiting from the heavy private investment in farming, mining, and tourism, but has been hobbled by the interference from the Labour-led Government, without which the progress would have been so much better.

💬 Hon Trevor Mallard: Will the member answer a question?

When I have completed what I want to say, the member will probably find that the question has already been answered. The West Coast is being hobbled by the extraordinary delays imposed on businesses by the Resource Management Act, which needs changing. It is hobbled by extraordinary time delays in providing consents from the Department of Conservation for access to the Department of Conservation estate for Pike River and Oceania. It is hobbled by extraordinary reluctance to provide a hydroelectric power plant. It is hobbled by dithering indecision in settling the Stockton snail preservation question. It is hobbled, in fact, by a Labour-led Government that has done little for this fine region other than to provide an element of spin. When will the Government learn that piling regulation upon regulation does not encourage prosperity?

In terms of the KiwiSaver scheme, there is more hobbling. The public did not have a great deal of input into the debate about the sort of retirement savings scheme it wanted. We heard from Mr Woolerton, who claims his Presbyterian Scottish origins preclude his being involved in gambling. One could then ask what he is doing as a New Zealand First member. One could remind him off the expression “Many a mickle makes a muckle.” Maybe if the debate had started on the basis of a true reflection of what New Zealanders wanted from such a scheme—

R Doug Woolerton: Say that again.

Many a mickle makes a muckle.

💬 Lindsay Tisch: How do you spell it?

With ease, with ease.

Tax deductibility, mortgage diversion, and other aspects have been wheeled in—perhaps as sweeteners to default providers. What will the costs be to the smaller schemes that will now find it practically compulsory to be KiwiSaver - compliant? Who knows? Does anyone on the other side of the House care, or are Labour members simply determined to ram through the legislation for the sake of their own political immortality? The reality is that at the present rate their immortality will be based on missing the point of public perception. Dismissing public perception is being limited to the political belt. Well, from what I hear from the public, the political belt is what this Labour Government is about to feel a sting from.

As I journeyed up to Parliament from the West Coast in my little blue truck, I was approached by people in the café where I stopped for lunch. A series of people expressed their indignation about the present antics of this Government. At filling stations, airports, car parks, on the plane, and in taxis—all the way—there was evidence from people who feel that their Government ignores them and is arrogant. What do they mention? They mention their indignation at the denial of the Government towards a perceived reality of the Taito Phillip Field affair—a denial that is increasingly casting a shadow.

I move, That the question be now put.