Media Release

17 May 2007

Changes to KiwiSaver unfortunate

The Retirement Policy & Research Centre at The University of Auckland raises concerns about the latest changes to KiwiSaver, announced in the 2007 Budget.

Susan St John, co-director of the Centre said that the very large tax-funded contributions to KiwiSaver will:

1. see huge shifts from other forms of saving to KiwiSaver.

2. not address the problem with the Current Account Deficit – in fact it may worsen the present position.

3. will widen the gap between the poor and the rich in old age – gaps measured by pay during the working life will be amplified by contributionrelated benefits in retirement.

4. impose huge compliance costs.

5. increase consumer spending in early retirement and so detract from savings goals.

6. encourage housing as an investment by the complex first home-owner provisions, although the detail of who is eligible is no clearer than before.

7. enhance overseas investment not investment in New Zealand.

8. cause a diversion into PIE and similar schemes with the reduction of the PIE rate to 30% with significant tax losses. The advantages accrue to the better off, especially those on 39%.

9. destroy any political consensus on retirement policy and put New Zealand back to the instability we had before the 1993 Accord.

Susan St John said “the high international regard in which New Zealand’s simple, equitable and non-distortionary retirement income policies are held has been seriously undermined."

ENDS

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