Most investment and financial advisors will tell you that Kiwisaver is a great thing and that every Kiwi shouldn’t miss out on joining and milking it. Well, it may be true that some of the benefits offered do seem really irresistible and are not offered by any other investment type.
But does it make it ethically acceptable?
You can also invest your money with tobacco companies or arms manufacturers, but most people don’t because they find it unacceptable for ethical reasons.
However, in case of KiwiSaver I haven’t heard one person pointing out KiwiSaver’s highly doubtful and unethical nature.
Let’s sum up the most irresistible KiwiSaver’s benefits and then explain why they are unethical:
(1) KiwiSaver joining bonus $1,000
Why should anyone get the taxpayers money to join an investment schema? If the investment is worth then people making rationale decisions would join it anyway.
Official government’s explanation is that it is to encourage people to start saving for their retirement. Well, I started to save for my retirement putting money in my savings bank account.
Why don’t I get the $1,000 perk, compliments of the tax payer?
KiwiSaver’s joining bonus $1,000 is highly unethical because it discriminates those taxpayers who have chosen alternative investment options. Joining bonus is nothing else than a bribe meant to lure victims into a financial trap.
Money from savings accounts can’t be funnelled away or stolen by the bank easily. But money in KiwiSaver funds are much more vulnerable to be funnelled away by the funds’ managers over the years via management fees, reserves, market’s fluctuations, etc.
Many KiwiSavers are not aware of this!
No one would give you free $1,000 if their benefit was not greater than that. Remember, there is no such thing as a free lunch! You will pay back that joining fee many times over in the coming decades.
(2) Possibility to withdraw some of the money for your first home loan deposit
This is nice, but it should not be tightened to KiwiSaver. Government should be supporting first home buyers irrespective of their investment decisions.
This perk is also highly unethical because at the end it will only support those wealthy families. People on low incomes can’t afford to shed 4% of their wages into KiwiSaver and therefore be ineligible to withdraw that money for their first home deposit.
Yes, they can save the 4% in their savings account instead of putting it into KiwiSaver, but many cannot do so because of their low incomes. And there is another perk attached to that one – first home subsidy that can reach up to $5,000. But if you are not in Kiwisaver, then you won’t get that either!
As you can see, the withdrawing money for the first home deposit plus the first home subsidy is available only to the high income owners.
Is it ethical for low income owners who cannot afford to join the KiwiSaver to subsidise the high income earners?
Well, to me that sounds not only unethical but even hideous. Through these two benefits KiwiSaver is just widening the gap between the poor and the rich and entrapping the poor in their miseries because they will never be able to buy their own home and be left renting for the rest of their lives.
Is there any difference between KiwiSaver and Tobacco Company or Arms Manufacturer?
Well, the guns produces may or may not harm someone, depending on whether they will be used. But KiwiSaver will definitely hurt people by keeping them in poverty, making it eventually even worse investment ethically than the Arms Manufacturers.
(3) Contribution towards fund management fees
The management fees should not be there at the first place. Contribution towards KiwiSaver’s fees is therefore completely useless.
It’s just a marketing campaign.
As far as I know, banks don’t charge management fees if you put money into Savings Account. And they still manage your money, it is not sitting there as a dug.
Why then are the KiwiSaver’s funds charging the fees?
They say the difference between the bank and the fund is that banks keep portion of the profit and the rest pays out in interest. Funds don’t keep portion of the profit, it all goes to you, but instead they charge fees.
Well, that’s nice but then how come the savings account interest was higher in year 2011 that the total profit in most Kiwisaver conservative funds?
Something doesn’t add up here. All conservative investments other that cash in savings accounts should provide higher returns.
Why are they not?
Ask your KiwiSaver fund manager for an explanation. We suspect that these funds are mismanaged and there other forces in play to funnel the money away from the funds.
You can’t see these forces, but they are there. Maybe fund reserves? Or other undisclosed fees? Or perhaps both?
In our opinion the whole KiwiSaver thing is just a giant fraught meant to enrich the few (read KiwiSaver providers and the Government) at the expense of many.
Everyone should think for themselves and decide whether the few perks are really worth it. It is getting obvious that not only are these perks highly unethical (taken from the poor and given to the rich) but at the end they will slowly be eaten up by the KiwiSaver funds and taken back from you anyway.
The fact is that almost all will lose, well, except the few who are running this giant Ponzi scheme with a nice idyllic name “KiwiSaver”. More appropriate name would be “KiwiLooser”.