Cullen: Launch of Ngai Tahu savings scheme
Friday 18 August 2006
Address to Launch of the Whai Rawa by Te Runanga o Ngai Tahu & Whai Rawa Fund Ltd
Copthorne Durham Street Convention Centre, Cnr Durham and Kilmore Sts, Christchurch
Tena koutou katoa.
In my role as Finance Minister I often talk about the importance of New Zealand businesses learning to be more innovative. Innovation is one of the primary ways of creating sustained competitive advantage, and hence building prosperity.
However, it is equally important that we as New Zealanders practice innovation in other areas of lives, including how we build and strengthen our communities, and our whanau, hapu and iwi. Whai Rawa is example of this kind of social entrepreneurialism, and I am very pleased to be able to represent the government at today’s launch.
It is an initiative that arose out of careful reflection within Te Runanga o Ngai Tahu on the long term issues affecting the well being of its many members. Those issues included a need to improve financial literacy and wealth management skills, and to ensure that future generations of kaumatua and kuia achieve a greater degree of financial security and independence in their old age.
That meant promoting a stronger savings culture, but to do so involved addressing the problem that many members of Ngai Tahu share with other New Zealanders. That is: how an ordinary working couple can maintain a savings habit over the course of a working life in which there are the normal pressures and responsibilities for caring for children and for parents and other whanau.
It was the same set of issues, as they applied to the whole of the working population, which led the government to develop the KiwiSaver scheme. That scheme is currently the subject of legislation being considered by select committee.
We realised there was little point in haranguing New Zealanders about the need to save when there were clearly a number of obstacles to them doing so. These obstacles may have been individually quite small, but their cumulative effect was to discourage long term retirement savings amongst those on low to medium sized incomes, especially those with larger families and those living in urban areas with high housing costs.
Like many New Zealanders we lamented the demise of employment-based schemes and other collective forms of retirement saving. And yet we recognised that many of those schemes were poorly structured and badly run, and that they assumed a pattern of long term, stable employment, where individuals stayed in one industry, and often with one employer, for most of their working lives.
Very few of us follow that pattern any more. Households arrange their work in very different ways, nowadays, and we need new and more flexible ways of long term saving that take account of that.
That is one set of social and economic forces that has led us to this morning’s launch.
The other set of forces has, of course, been the long process of putting right the historical breaches of the Treaty of Waitangi by the Crown, including those breaches that undermined the economic strength of Maori. That process has restored to many tribes their mana, their ancestral land and taonga, where possible, and their ability to attain economic self-determination.
Ngai Tahu was one of the first out of the blocks, and one of the first to encounter what many have come to realise since: that the process is one that will take several generations to complete, and that it involves not returning to some golden era of the past, but equipping the members of the tribe to stand tall in a modern, technologically advanced and highly globalised economy.
Building and managing wealth is an essential set of skills for that world. That is something all New Zealanders, both Maori and non-Maori, need to wake up to. The fact is that since the late 1990s New Zealanders have experienced nominal wage growth of some 31 percent and real wage growth of around 16 percent. Maori have shared in this growth, and are thereby part of a generation that has a much greater ability to save for retirement than its predecessors.
All that is needed is the will, and some practical, easily accessible options.
This is not to say that the state pension will not play an important role in providing a bedrock retirement income to members of Ngai Tahu, as it does for the rest of the population. The government has committed itself to making New Zealand Superannuation a fiscally sound base-level pension that is sufficient to keep all retired New Zealanders in touch with the prevailing living standards of the day.
We have never disputed the fact that most New Zealanders would want to supplement that with some personal savings. Indeed we have recognised that such savings provide wider benefits, not least in terms of increasing our domestic pool of investment capital.
That is why we did not consider the job done once we had secured New Zealand Super, but continued to develop the KiwiSaver scheme.
Whai Rawa is not a KiwiSaver scheme; at least, not yet. I trust that once the legislation is passed, the Trustees of Whai Rawa will look closely at what KiwiSaver has to offer and consider whether to make use of it to serve their members.
The government will support KiwiSavers in three ways:
First, we will meet the costs of the administration through IRD;
Second, a $1,000 upfront contribution will be provided to each new KiwiSaver, including members of an existing registered superannuation scheme that fully converts to a KiwiSaver product;
And third, the government will provide a fee subsidy at a capped level to savers in approved KiwiSaver products. The details of this subsidy will be determined after consultation and negotiation with providers.
One of our intentions with KiwiSaver was to make it sufficiently flexible that many pre-existing schemes could come under its umbrella. We also hoped that merely signalling how important savings is from a policy perspective might lead to the creation of some new and innovative approaches.
Once again, Ngai Tahu is first out of the blocks with Whai Rawa. It is a scheme that deserves to be fully subscribed by members of Ngai Tahu, and I would hope that over time it would provide a useful model for other runanga who are seeking ways to provide practical assistance to promote financial security amongst their members.
I have to say I am very pleased to see a heavy emphasis on prudent management of the Whai Rawa fund. In the last few months we have seen some unfortunate failures in the financial services sector, with resulting worry for a small, but significant number of investors.
While the reasons for these failures vary, it is a matter of concern to the government to ensure that those to whom New Zealanders entrust money for investment purposes carry out that duty in a careful and highly professional manner. That is what lies behind the current Review of Financial Products and Providers, which will be the subject of a discussion document to be released within the next few months.
It also underpins the KiwiSaver legislation, which stipulates a strict regime of prudential management for all qualifying schemes.
I also want to mention concerns you have raised with me regarding the tax treatement of distributions to be made by Te Runanga o Ngai Tahu to members' accounts in Whai Rawa. I want to assure you that work is underway to ensure these will not be taken into account when assessing members' eligibility for social assistance. In line with other reforms we are also mindful that these distributions should be subject to a final withholding tax based on the marginal tax rate of a member. The government is now considering generic legislation to be introduced next year to cover these issues and officials will work with you on the design of the new rules.
Te Runanga o Ngai Tahu has over the past 15 or so years won considerable praise for its sound governance and its consistent focus on creating long term, sustainable value. I trust that Whai Rawa will be a further extension to the many ways in which Ngai Tahu takes care of its own and builds, slowly but surely, a better future for successive generations.