Myth: Kiwisaver was established for the benefit of ordinary New Zealanders
Truth: Main purpose for establishing Kiwisaver was to benefit the fund providers like the banks, insurance companies and other financial institutions that administer Kiwisaver funds. They benefit from Kiwisaver schema mainly by charging the management fees.
Ordinary New Zealanders were offered few perks as incentives to join. However, these incentives are only shorted lived and in the long term will be consumed by inflation, low returns and exorbitant management fees.
Myth: Kiwis are getting a good value with Kiwisaver
Truth: Kiwis are getting extremely poor value if they invest their money in Kiwisaver. Initially the management fees (let’s say 1%) may seem low. Yes, if someone has $1000 in it then the annual fee is just $10.
But what about 20 years down the road when they have $100,000 balance? Is paying $1,000 reasonable? Would you accept paying your bank $1000 every year for a savings account? I doubt that! But with Kiwisaver you have no choice.
You can’t invest your money into a bank savings account or term deposit. Your only choice in Kiwisaver is to put your money into a fund and pay the management fees. So, clearly the Kiwisaver is much in funds’ favour, not yours.
Myth: Kiwisaver is presently far superior investment compared to other investments
Truth: That may be truth, but in only very limited view and only short term. Government had to bribe people to join with$1000 joining bonus and some other incentives. You know that rule: “There is no such thing as a free lunch”.
Why would government be giving out anything free? That does not make any sense!
Of course, the incentives are not free. As mentioned, after some time when your Kiwisaver balance grows, your management fees will be so high that you will back those initial incentives many times more.
Even current $500 annual bonus toward fees will be more than matched by real fees which will be in the thousands. So not such a great deal after all!
Also if you look at the Kiwisaver performance over the last few years, it’s nothing spectacular. Without the initial incentives (which are l loosing strength with each passing year) the Kiwisaver would be one of the worst investment options out there.
In few years’ time it will probably become one of the worst investments not only relatively but absolutely, even with the included incentives.
Myth: Kiwisaver must be a good thing if it was supported and pushed forward by politicians across the whole political spectrum
Truth: The logic and rational of Kiwisaver sounds good, but only to people without financial qualification.
Also, not the whole truth was advertised about Kiwisaver. Most politicians themselves have no qualification in business, finance or economics. They just bought what was said to them.
It is safe to say that most politicians belonging to that first group were simply inadequately educated, naïve or simply stupid. They just followed their party line without thinking too much or investigating the matter thoroughly.
Then there is the second group of politicians with the knowledge. They knew from the beginning what the Kiwisaver is all about.
So why did they still push for it?
Simply because they were corrupted by the finance and banking industry. Or they themselves were in a great conflict of interests having some sort of connections to the Kiwisaver industry.
Myth: Kiwisaver is a safe place for my money, overseen by various government agencies.
Truth: Nothing can be more far away from the truth than the above statement. Just because government is keeping an eye on Kiwisaver industry does not make it any safer than all he well known Finance companies that went bust in the past.
You have to realise that the government in this case is not an independent third party here. They are accomplice in crime. They profit themselves from Kiwisaver.
As mentioned some government officials may be getting direct profit from Kiwisaver in form of corrupt money, bribes, kick back or their indirect involvement with Kiwisaver providers (their family, friends, relatives, etc.).
Another thing to remember is that in the future government can also simply introduce pension’s means testing. So, if you didn’t save anything during your life then you get a full state pension. But if you have some savings from Kiwisaver then your state pension will be reduced or maybe even completely taken away.
So, in a way they will punish those who were responsible and saved for their retirement and reward the irresponsible ones who saved nothing.
But that’s nothing new – government is doing so already trough the taxation of the working class and via benefits for the unemployed. They call is social solidarity and in the future they will simply extend it to the pensions area.
They will always find some sort of justification for what they doing. With the right wording they will be able to justify whatever they want and most people will buy into it.
And there are so many other ways how the government as an institution or the state may be profiteering from Kiwisaver and how they can get their dirty hands on your money in Kiwisaver.
So, how much money will be left for your retirement and how much will be eaten away by various parasites in the process?
This, off course, assuming that there will be any money left in Kiwisaver funds in 20 or 30 years.
That money can simply vanish, thanks to bad fund management, fees, financial crises, market crashes, governments bankrupting (i.e. Greece, Spain, Ireland, Island, Portugal, etc.). There countless other ways out there how your Kiwisaver money can go bust!