KiwiSaver 2.0 - $5000 free from birth

0:00Imagine if every Kiwi kid had $5,000 invested into a Kiwi saver account at birth and left high school with a balance of roughly $20,000. The kickstart would be taxpayer-funded, but instead of raising taxes or borrowing, the state would reallocate the roughly $500 million it currently spends on incentives every year. This is part of Kiwi saver 2.0, a non-political, non-partisan blueprint for growing New Zealand into a richer country. It's a plan being put forward by this man, Fraser Winnera, leading director, former Mercury Boss and head of Jacinda Redun's Business Advisory Group, the downside of this, an incentive worth $260 a year for people earning under 180K and contributing at least a grand, well, that would be scrapped. The upside, a nation of kids who have an understanding and appreciation of investing in financial goals, Kiwis who are invested in New Zealand, young people,

1:01with a reason to stay. Fraser joins me now for an extended discussion to make his case. Fraser, good morning. Morning, Ryan. How you doing? Yeah, really good. And great to have you here. Can I start with why you're doing this? Yeah, that's a great question. So we, about in 2020, I was part of the Business Advisory Council of the Prime Minister, and we looked at Kiwi saver to put some advice forward. And so we drummed something up there. Nothing happened with that. And that is actually precipitated because I was sitting in the context center at work, which is a great place to hide so no one annoys you. So I can, and I was talking to the people next to me, and some of them weren't sacrificing 3% to get 3% from the employer. And I thought this was grossly unfair, particularly because the employer piece should come to them. So combined with being on the Business Advisory Council, we put the advice forward. And about a year ago, I thought, well, we need to, we really need to push this upper step for Kiwi saver, because it's getting tweaked a lot. I reached out to a lot of people, read a lot of stuff, the retirement commission

2:02of reports, but reached out to everyone from unions, NGOs, financial markets to try and understand what they thought Kiwi saver could be improved to, to see if we can thread a needle that was going to work. I think Kiwi saver has a great, has had a great first 20 years, Ryan. But it's time to sort of map out the next 20 years, because at the moment it keeps getting tweaked without a destination. So this is, you're not being paid by someone to do that, you're literally just calling all these people and going to them off your own back in your own time. That's right. Okay, you mentioned the contribution. So it is going to go up to three and a half and then a bit more. Yeah. But the contribution at the moment, if I don't pay it, then my employer doesn't have to pay it either. You say that's unfair. Well, what happens now? We've got to make, sometimes it's, if you don't pay it, the employer doesn't pay it. But sometimes if you do opt in under a total remuneration contract, the employer deducts the employer contribution as well from your package. So at the moment, we have several systems running. Now that's against the spirit of the scheme,

3:03which was the employer piece was supposed to be on top. That's another change in Kiwi saver 2.0, which is, if they say you're getting paid $100,000, the employer is part of your package and might have insurance or a car in it or something, then the employer piece always needs to come on top. So that it is a genuine employer contribution. But in the end, we'll be looking to very slowly ramp the employer contribution over 20 years to get us up to something which is going to be really strong partner with the entity to become retirement. Because at the moment, the Aussies are what, like 11%, 12, just over 30 years to get to 12%. Right. So you want us to ramp up and you want the employer to do that lifting. Yeah. Well, in the end, when you have it compulsory, most schemes around the world, whether it's employer or employee, it doesn't actually matter. It's all part of how our employer views the payment arrangements. And also, a lot of people left out of this arrangement too have been the self-employed or contractors. They need to come into the scheme as well on what

4:06they declared to IRD in the middle. But the starting point is always how do we get to 18 in great shape. And that's why I want every Kiwi child born and vested. Right. I want to get to the bad stuff after the break. So I can hear business owners right now probably throwing the cups of tea at the television. I'm thinking about people who are struggling with the cost of living, are you serious? More. So we'll come to that in a second. I promise we will. But can you tell us about, you've laid this out in a series of linkedin posts, which got my intention. And you talk about Maya. Can you tell us about Maya? Yeah. Well, let's imagine Maya is born next year in 2027. She'll be retiring in 2092. But right at birth, her parents are tired and exhausted. And the last thing on their mind is opening a Kiwi saver account. The government and the IRD can open that Kiwi saver account for her automatically. And $5,000 can go in then. And then as she's growing up if her parents or aunties instead of spoiling for the birthday by giving something, they can put

5:07that money into the Kiwi saver account, which isn't even better way to spoil her. You put in $100, you get $100. So that's where the engagement happens through time. Maya goes to school. The Kiwi saver account, because every child has one, is in the social studies curriculum from year 1 to 10. Now there's 60,000 babies born at the start. That 5,000 times 60,000 is 300 million, which is less than the 500 million spent on the sincere of most of us don't look at today. So she gets to 18 and has between 20 to $25,000 in the bank account. It would have been invested in a default growth fund, which means she's had to ride an equity cycle. There's no withdrawals, so then she'll be, along with her peers, all in a relatively similar position, a respective of postcode, or gender, or any other thing you can think about. All the 18 year olds are feeling invested. They'll be very financially literate. I can imagine lots of kids will be gamifying this and comparing their statements, and who's put the most in. But they'll all actually be in a

6:07very similar position at 20 to 25,000 and engaged in New Zealand's future. And I think the technical argument for doing that is that compounding is this great miracle. Einstein called it the eighth wonder of the world, I think. If you started zero on the way to 65, those original components that get you through to 18 will turn into $430,000 by the time you're 65. So that's the five grand and the 100s that go on. And the way that you do this phrase is you make that compulsory. Yes. Whenever a child is born, it's automatic. The money goes in, and the parents can't get it out. It's not, you cannot be touched. That's right. And it is that child's, and what does that do for New Zealand's savings rates? Because we know we're way behind the Aussies, we're way behind the eight ball. Well, that gets them certainly more financially literate and engaged in the saving. I think over, as that complements and they go into working life, that will grow further. So we'll

7:07under the whole Kiwi Saver 2.0 by the time you get to say 2075 instead of having a projected sort of $3 trillion total aggregate savings will be at about eight. But it will lift our savings rates a lot. That's really important for a country. I don't think I hear Australia or Canada saying, let's get rid of our superannuation arrangements and say, we've got it wrong after all 30 years. And indeed, Mark Carney referred to the strength of the superannuation funds in that famous speech he gave recently. Yeah. So did you say 2075 would go from current predictions, 3 trillion to potentially 8 trillion in savings? Yes. So the spin off of this is potentially massive. Yeah, we have a lot of capital, which will be held individually then. But it also means that the more the more things that attractive investments become in New Zealand, the money will flow to that. So let's say some toll roads need to be privatised or some other

8:09assets need to be sold by local government, for example. Or Kiwis can own them. Kiwis, I mean, why wouldn't, why wouldn't Meyer at 18 want to have a 20-year inflation protected toll road in the airport folio? So it does free up capital to do that. What we're saying in Kiwis, have a 2.0, though, is that those funds of Myers can't be forced directed by the government. It's actually up to people to make a track of, all right? This sounds, if you're listening to this this morning, sounds cool. Sounds exciting. Sounds like somebody has come to the table with something that's been thought about has been written down a plan has been concocted and it's not just tweak here and tweak there. When we come back, what about the bad bits? Fraser, what about those people who've been watching business owners, small business owners, people who are, whose budgets are really tight at the moment? This all sounds great, Fraser, but we can't afford this and we cannot afford this especially now. Yeah, that's right. So the first thing I'd say is we need a clear destination, not lots of

9:13little tweaks with Kiwis saver and that's part of what Kiwis saver 2 is about. So part of the transition to ramp it up takes 20 years. You can't do this quickly. Australia took more than 30 years to get to 12 percent. My proposal is from next year we start with the employer contributions at 2 and they just left it half a percent until 2047. So it has to be very slow, very predictable, very politically ambidextrous because it needs to remain. Costa living, let's talk to that, that is actually a different policy set. I mean, you can't sort of knowingly under-save for a time to save a Costa living issue now. We need to get the retirement savings in a good space, very gently and carefully over time, but then go even harder on cost of living policies. But if we knowingly sacrifice the future to pay for today, I'm not sure that's a great strategy. But to be clear on, there's no free lunch in this. Money that is allocated into something else whether them, it'll come from the employees pay rises will probably be slightly lower. Cost of a haircut might

10:15go up slightly. So it doesn't concern me. And then you've got, and then you've got other things like shareholder returns might be slowly lower. That's kind of where it comes from. But the beneficiary of where that comes, of where that goes to is clear. It's Myers individual account. So there is a cost to this and that's why it has to be done carefully and predictably over a long time. Is this the kind of thing you stop and think about because New Zealand is heading down a track that is actually quite scary? Yes, it is. Like third-worldly? Well, certainly we start to, not third-world, but you start to, we're at the bottom of the developed world in the OECD rankings. And if you look at which I'm sure you saw Ian Renny, the Treasury Secretary's comments in January 2026 says our current policy settings are unsustainable. And so the best time to fix this is the earliest time, because the longer we leave this, it becomes impossible. And I think one of New Zealand's greatest forks in the road in its history was in 1977 when Maldonin abolished the compulsory sector. We would be better off than Australia per capita now in terms of our

11:19savings. So what you're saying is stop the tweaks. Stop the politicking. Get together. We say this about everything they're phrased. We say this about infrastructure. I mean, so what are you going to do with this plan? I mean, you spend obviously a lot of your personal time on it. You're spoken to a lot of people about it. What are you going to do with it in the hope that they might, but they're heads together? Well, we'll certainly be sending in very shortly. In the next week, the policy paper, and I wanted to get all the feedback on LinkedIn and through other channels like this, before we finalise that, because this has been heavily socialised. We'll send it into seven political parties, a six in power, plus the opportunities party. And the real challenge to them is to say, you have to design this as if you're going for a 75% supermajority referendum, which means you have to design it not for your constituents, because no political party can get more than 35%. You have to design it for something like 75, and because it needs to be durable, it needs to be trusted, and it needs to be coherent. And that's a challenge for our politicians,

12:20but in the end, the other ones that make laws on behalf of New Zealanders, and if New Zealanders want this to happen, contact your MPs and get on to them about Kiwis Ava 2.0, or something better than that, because in the end, it's the, not necessarily front bench, you know those back bench MPs, they lose their jobs if the vote goes down, so they're heavily invested in reflecting the views of society. So I think that's what we need to do. Designed for a supermajority, this policy needs to last six elections, and then it will be embedded. Fraser, it's been lovely to talk to you today. Thanks for bringing your ideas to the show.