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KiwiSaver morphs from savings to cheque account

John Key MP
National Party Finance Spokesman

24 August 2006

KiwiSaver morphs from savings to cheque account

KiwiSaver has morphed from an anaemic savings account into a cheque account with the extensive changes announced today, says National Finance spokesman John Key.

"This is confirmation that National was right all along. The scheme's initial design lacked the incentives needed for people to change their savings behaviour.

"By allowing mortgage diversion of half their contributions to KiwiSaver, the Government is now letting people funnel their employee contributions straight out of their savings account into their mortgages.

"KiwiSaver, a scheme designed to increase savings, is rapidly looking more like a cheque account.

"This risks delivering accounts with low balances, insufficient for retirement planning - the very reason the Minister rejected a 2% contribution rate even though the net effect of mortgage diversion will mean that most accounts are saving just 2%.

"There are some risks that instead of paying off the mortgage, homeowners will use the money for yet more inflationary consumer spending.

"There is no free lunch with this scheme. It is possible that some employers will offset the cost of their contribution by reducing future wage rises.

"The changes announced today were dropped without notice. National will still oppose the second reading of the KiwiSaver Bill this afternoon.

"However, because of the extensive nature of the changes, National reserves its position on the final reading.

"Today's announcements are a further admission that Kiwi workers are over-taxed and without being able to rob their savings accounts, they simply can't afford to pay the mortgage."


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