News release Topic No 1: NZ Superannuation/Kiwi Saver

                             Nationals Crude Policy

The regular Retirement Commission (Govts own advisory body) recommendations are largely ignored by National. The 2013 document “The Future of Retirement Income Policy” and the 2025 Review of Retirement income policy, are very sound documents with their policy recommendations, providing an excellent basis for Government to move forward on retirement income.

The National Govt flip flop on Kiwi Saver, is a crude attempt, merely camouflaging their goal of reducing NZ Super costs and means taxing constituents. The long-term outcome if their changes are implemented, has many new costs to arise, and many un-intended consequences if implemented.

Future Projections for a big-ticket item like NZ Super are significant costs, but in the context of our status as the best Tier one Superannuation scheme in the world, minor changes to Kiwi Saver will achieve excellent outcomes.  Our Scheme now and into the next 3-4 decades, will remain well below most OECD pension costs, most countries giving an arm and a leg for our situation, (none so blind as those that cannot see that). Currently most OECD countries pay about 10% plus of GDP on pensions, rising to 15% plus over the next 40 years.

From a Policy point of view, the platform is there to announce, a working party review to NZ Super (last done 1991 Todd Report etc.) retain the current age of eligibility until that review is completed, and indicate a rise in Kiwi Saver contributions -but below Nationals silly figure- as a likely pending consequence. The Public mood will buy into that common sense approach, one lever policy suggestions and knee jerk options, I would suggest are seen through by many New Zealanders.

I would also suggest any milage in touting the Australian scheme is just poor policy and poor research. Their scheme is complicated, costly in the sense of huge tax concessions for the well off (huge cost which Nicola Willis is silent on), and we are envied by many in Australia for the effectiveness and efficiency of our scheme, supported by the Future fund, and our Kiwi Saver supplementary scheme.

This is what the 2013 Retirement Commission Future Report said

                       Page 66   Compulsion for Kiwi Saver

Some submissions to the Review have proposed in response that Kiwi Saver membership and contributions should become compulsory. However, would be conceived by members as an additional tax (even though contributions are placed into individual account) and undermine the objective of encouraging individual responsibility and choice. It is also unclear the extent to which compulsion would allow higher income earners to simply substitute Kiwi Saver for other forms of savings, meaning that compulsion would not affect all members equally. A proportionally greater burden would probably fall on those with low incomes.

A compulsory system can also be expensive because of the need to ensure compliance. In addition, tax incentives are often still required to make compulsion acceptable. (Editor note-The Aussie scheme is full of expensive tax concessions-Nicola Willis silent on this topic).

With compulsion there is little incentive for regulators and the financial industry to reduce complexity and allow for comparability of superannuation products. Financial services providers would not have to work so hard to keep customers, so competition and the pressure for innovation would be reduced. In terms of compulsion being a means of building numbers of Kiwi Saver members, it needs to be remembered that these have grown on voluntary basis from zero to 2.2 million in the first 6 yrs of Kiwi Saver, (Editor note, this has trend has continued since 2013 with over 90% of eligible employees contributing in 2026. There is a strong argument that Kiwi Saver numbers and membership have already achieved their purpose.

Finally, the 1992 Task Force on Private Provision for Retirement (The Todd Task Force) noted a likely outcome of a compulsory savings system would be introduction of means testing for New Zealand Superannuation. (Editor Note.

 

*The 2026 National Party Kiwi Saver proposals are a clumsy and crude policy shift, the outcome will be a messy and less than satisfactory retirement income system for the next Generations of New Zealanders”.