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Union demand adds to KiwiSaver's flaws

John Key MP National Party Finance Spokesman

28 February 2006

Union demand adds to KiwiSaver's flaws

A union's warning that it will be calling for employers to contribute to workers' KiwiSaver accounts needs clarifying, says National Finance spokesman John Key.

"The unions need to clarify whether their call for employers to match savings will be offset by lower expectations for increased wages during upcoming rounds.

"Without such a concession, upcoming wage rounds will be astronomically expensive for employers.

"While National supports greater savings as a principle, KiwiSaver is a glorified Christmas Club and its design is fundamentally flawed.

"You can still move your money in and out of your account. Overseas experience has shown that many accounts in similar schemes lay dormant.

"The fundamental problem is that Kiwis don't save enough because they don't earn enough.

"Boosting the savings rate requires a long-term commitment and yet the current structure of KiwiSaver encourages short-term behaviour because it can be withdrawn at any time.

"In fact for the majority, that's exactly what will happen when they've saved enough for their first-home deposit.

"The state sector scheme only has a 50 per cent takeup rate - and that matches contributions dollar for dollar.

"KiwiSaver offers nothing of the sort - yet Finance Minister Michael Cullen predicts that 25 per cent of the workforce will sign up. He's dreaming."

ENDS

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