KiwiSaver must not be used as model for personal accounts - EXCLUSIVE

Tor Financial managing director David Harris visited the US, New Zealand and Australia with Standard Life to learn more about the countries’ pension schemes.

Harris said the fundamental difference between KiwiSaver and the UK’s plans for personal accounts would be in the system’s delivery.

The New Zealand system is administered and sponsored by the government. But Harris said the biggest challenge in the UK would not be outsourcing personal accounts to third-party administrators but how it would affect existing occupational schemes.

"To compare KiwiSaver and personal accounts is deceptive. It’s telling a half truth. We need to be clear that we are going into unchartered territory.

Harris said only 14pc of New Zealanders had access to occupational schemes compared with around 46pc in the UK.

He said the KiwiSaver scheme had highlighted a "levelling down" of occupational schemes, as both employers and employees favoured the government-sponsored scheme.

Harris also said both New Zealand and Australian pension schemes invested heavily in default funds, as members were not properly educated about investment options.

"Returns will be lower if schemes are playing it safe. Young members need to be investing aggressively to get the returns needed for retirement."