Since KiwiSaver kicked off just over ten years ago, 2.8 million New Zealanders have signed up for the voluntary, work-based savings initiative.
Their contributions have grown into a significant pool of money and it’s time to put this to work building much-needed infrastructure, says investment manager Sam Stubbs.
New Zealand's most successful financial product is now worth $42 billion and by 2030 will be equivalent to one year of the national GDP.
The government should consider unlocking its potential, says Stubbs, the managing director of the KiwiSaver fund Simplicity.
“The GDP of New Zealand is about $175 billion a year so that means we’re going to have almost one year’s entire economic output in the form of savings by 2030.
“We’ve never seen a savings pool in New Zealand this large.”
Such a significant pile of money could be used to transform the country, he says.
“When you get a big pool of money like that really great things can happen. Because, all things being equal, a KiwiSaver manager would prefer to invest in New Zealand than overseas because there’s less risk.”
Our retirement money is being invested in overseas infrastructure projects all the time, but there is a huge need for updated infrastructure in this country, he says.
The country is growing economically, our population is growing and there is a need for more infrastructure, and KiwiSaver contributions are a growing pool of money perfectly suited to stable long-term investment right here in New Zealand, Stubbs says.
“The really beautiful thing about this is both perspectives – savers and investors – both of them have a very long-term view.
“You have a very lovely balance between the type of investments people want to make and the type of money governments and local councils need to invest.”
So how would a Kiwi saver get a return on, say, a sewage plant?
Currently, such infrastructure projects are often funded as public-private partnerships (PPPs) in which the government goes to the open market, announces a large-scale project, and seeks funding and operators.
For that it guarantees a return on capital to the private investor. More often than not an overseas financier.
The problem with that is overseas money is seldom patient, and a 30-year plus return on an asset is unattractive. KiwiSaver, however, seeks just that type of investment.
“If you think about making a long-term investment one of the things you really value is the consistency of the return.”
That could be nation-changing, he says.
“This is the first opportunity arguably in the history of New Zealand where New Zealanders’ savings for their retirement can end up being invested in the country that they’re living in.”