Mr Peters revealed his "KiwiFund" policy at New Zealand First's annual conference over the weekend. It would involve the NZ Super Fund setting up a low-fee KiwiSaver fund that would compete with existing private sector KiwiSaver funds which he says are charging excessive fees.
Any savings committed to the new fund would be guaranteed by the government.
Mr Peters plainly stated that the policy would be a bottom line in any post-election coalition talks next year.
Mr Key yesterday said there was no reason why the NZ Super Fund or even ACC couldn't offer a KiwiSaver product, "but whether it would be dramatically cheaper than the others I'm not so sure".
However the government guarantee would be "a massive problem".
"This is basically saying to that group there is only upside potential and no downside risk," Mr Key said.
"As we know in the financial markets, that's never a strategy a smart government will underwrite because there are times where the markets go up and down."
He doubted the policy would be a prerequisite for NZ First in post-election talks. "There are no bottom lines when it comes to Winston Peters."
Mr Peters said later that Mr Key didn't have a shred of evidence that NZ First had not stuck with its bottom lines in the past.
United Future leader Peter Dunne said he was sceptical about Mr Peters' policy.
"I don't see that insitituting a separate fund is actually going to achieve a hell of a lot."
Meanwhile, Mr Key was yesterday more positive about the prospect of working with the Conservative Party leader Colin Craig.
"Let's wait and see, we haven't made any decisions. Next year we'll give you a clear steer of where we're going."
- Adam Bennett of the NZ Herald
