Clumsy and less than honest Policy change?
NATIONAL PARTY COMPULSORY KIWI SAVER: QUICK GUIDE
- Compulsory all workers by July 1 2028
- Rise employee/employer contributions to 6% each by 2032
- Enroll all newborns with a $1500 bonus
- Top up accounts while on parental leave
- Require employee to contribute for workers over 65
- *Talking” about removing Total remuneration clause, but unlikely action by National?
The Governments own Crown entity Retirement Commission recommended to government Compulsion must not occur, without a Whole of Policy review e.g. Todd review, Working Group Retirement income. Recommended a 10-yr road Map, cross party agreement.
RC ON COMPULSION
- Comes up frequently, the evidence shows Kiwi Saver already has high membership, over 90% of workers already enrolled, under 45 yrs its 95%.
- Those not in KS are not in paid work, low income or self-employed.
- No Employer contribution for self-employed.
- Compulsion falls proportionally greater burden on low incomes.
- Compulsion allows high earners to substitute KS for other forms of savings, weighs more heavily on lower income groups.
- Compulsion perceived as another tax, undermining choice.
- Compulsion usually brings tax incentives to make it acceptable. *Editor note Aussie classic example where tax concessions cost more than the Super scheme. Not offered by National, but very likely to occur.
- Compulsion is easy money for Finance/Investment Companies, lessening competition and innovation, as its guaranteed money.
AI
- Immediate cost, forcing individuals to lock away a portion of income, can cause hardship
- Self-employed. 600,000 Kiwi. No employer contributions. A dollar cost hit.
- Limits Financial Flexibility.
- Suggests priority should be to make scheme attractive rather than mandatory
ALEC WAUGH OPINION
A clumsy policy attempt by National to camouflage the real goal of raising the age of entitlement and to means test Super. Said quickly, means testing and Compulsion is attractive to the uneducated, so some political buy in. National using this approach to get traction on their primary agenda of means testing and raising the age of entitlement, little interest in evidence-based policy and to use Aussie Model is unforgiveable.
*We need a long-term political accord to focus on providing certainty for future generations of retirees and stop piecemeal policy change. (Jane Wrightson ex Retirement Commissioner ).
* All proposed reforms to NZS are problematic, and none are simple enough to be “silver bullets” to any perceived problem with retirement income policy. We see means-testing and flexible age of eligibility as fails when assessed against RIIG’s principles for reform. NZ Society of Actuaries.