Becoming a nation of investors and savers

0:00This is the Milford report, Altera's ageing population is creating a structural funding problem, the silver tsunami, and the shrinking workforce mean that under current settings, NZ Super won't be financially sustainable. Joining me now to talk about that is Blair Turnbull, Milford Chief Executive of Good Morning Blair. Good morning, Arthur. Good to have you here in the studio. Thanks very much for making time. Look, we need to become a nation of savers apparently. What does that mean? We do look, we have an ageing population, but unfortunately we also have a savings shortfall, and by around 2030 we estimate to have about one million Kiwis 65 years or over, which is exciting in its own right, but that said we do have a saving shortfall, and part of that is we have fewer workers. So when I was born around 1970, there were seven workers for every one retired person over the age of 65. Today, that's about four to one, and by 2060 that will drop further to two workers to every one retired person.

1:00And part of the challenges is that when people are arriving at their retirement age, about 40% of them have little or no private savings and are relying solely on NZ Superannuation, and that's a challenge because the Treasury have very clearly said that at the current settings and age eligibility, NZ simply won't be able to afford NZ Super. So we need to become a nation of savers. That's easier said than done I suppose. What are the levers that we need to be trying to pull to actually guide that a little bit? Certainly, and this is a self-help strategy, there are levers that we can pull, but we do need to look long to do that. Firstly, talking about it, financial literacy doesn't have to start at the age of 55. We need to talk about it at schools, when you get your first job in the workplace, as well as over the kitchen table. New Zealanders, as a whole, we're not very good about talking about money, so we need to be feel more comfortable so we can help shrink the problem. The second one is Kiwi Saver. Kiwi Saver is a great foundation block,

2:01and certainly the increase in the savings contribution rates from 3% to 3.5 next month and 4% will help a lot, but it's still not at the levels that we need it to be at and we compare it to Australia and other countries. It's pretty incremental, isn't it? So does it feel like we need to fast forward on that, or are there some other things that we need to be doing with that money, do you think? Look, I think we can, and I think for a number of reasons, we can feel confident about increasing the regular contribution rates of Kiwi Saver. So if we look at Australia, and it's not a competitive sport, but we do take some learnings from Australia, they've got a $5 trillion superannuation and managed funds industry, and that pool of wealth has enabled them to invest in infrastructure, in roads and utilities, and it's just created a real nice positive flywheel in terms of opportunities. If I look at their ASX, I've had about 400 IPOs in the last five years. We've had about 15, so we know that if we can create a nation of savers, we can create savings pools that can be invested back in businesses, back in infrastructure, and that's good for the government,

3:05it's certainly good for communities and it's good for individuals as they look forward to their retirement. Because there are certainly some safeguards I guess around investing in longer term, less liquid players like infrastructure, all riskier players I suppose, with Kiwi Saver at the moment aren't there, but you would see what would a greater capital depth with a deeper pool that some of that might be certainly more sustainable, and that you might see a bit more comfort as well. Yeah look at the crux of this, we're looking to make, you know, the crux of a savings gap is a productivity gap, and we know that, we look at OECD countries, we're 27 out of 37 for productivity. We need those two workers per old person working real hard, and savings can be put to work, you know, it does, it is a positive flywheel, it spins back into investments and businesses and infrastructure, does take time, it's not an overnight solution, and we do need to look over the medium to long term, we need to see this as a 20, you know, 30-year opportunity, but it starts now. I've got a CEO in the chair, I can't resist asking, so Miles Harrel, CEO of Frontiers, moved on after

4:08eight years, you were at tower for not quite that long, how does someone in the top job know when it's time? Look he's done a wonderful job. Someone who I always admire Barbara Chapman once said to me that, you know, when you get a CEO role, and this is my third time round, you know, the first two years are all about investing, they're about transforming the business, they're about making positive change, you then spend two years fixing up all the mistakes that you made, and then you spend one or two years, you know, really enjoying the role and ensuring that you have great succession, and you leave the business in a better place than you found it, so I think at eight years I think Miles is done a wonderful job.