Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


NZ First KiwiSaver policy misguided

NZ First KiwiSaver policy misguided


By Dr Claire Matthews.

It is unfortunate to see NZ First suggesting significant changes to KiwiSaver as part of its policy platform for the general election. A clear message from the public has been that changing KiwiSaver creates a level of ongoing uncertainty, discouraging some people from joining and making others resentful of their required membership. The suggested changes should not be supported for that reason alone.

Nevertheless, we should also consider the potential value of the specific changes that have been suggested. Unfortunately the NZ First policy has a similar flaw to the Labour Party’s KiwiSaver policy in trying to achieve multiple objectives. The NZ First policy is arguably worse in that it moves away from the original purpose of retirement savings by trying to turn KiwiSaver into a general-purpose savings vehicle. What’s next – allowing funds to be withdrawn to pay for medical expenses or to establish a business?

KiwiSaver was established to help New Zealanders save for their retirement. It was a response to the recognition that the standard of living available to someone relying solely on NZ Superannuation in retirement is marginal, and growing concerns about the affordability of NZ Superannuation given the growth in the number of retired New Zealanders.

We have already had some dilution of this focus, with the inclusion of a first home withdrawal benefit. However, if this is done early enough in a person’s membership the long-term effect is likely to be negligible – and there can be retirement related benefits from home ownership.

The NZ First policy goes much further by allowing withdrawals for education and a home, where the education can be for the member or someone else in their family. A scenario where a KiwiSaver member gets to retirement with almost nothing in their KiwiSaver account is very easy to imagine.

For example, making withdrawals over their lifetime to fund their own education, the purchase of their first home, the education of their children, re-education for themselves due to changes in the job market and then education of their grandchildren, would leave little at retirement. It is worth noting that the information on the NZ First policy is not clear on whether home purchase withdrawals are limited to their first home, or any home – the latter would further worsen this scenario.

Over time, better returns can usually be achieved by investing in shares. However, this requires a long-term focus, which allows the short-term volatility to be tolerated. Allowing withdrawals earlier than retirement, as suggested in the NZ First policy, moves the focus to a short-term horizon. This would also have an impact on investment choices, with a preference for more conservative, less volatile investments which are likely to result in lower returns. This would cause further deterioration in the situation at retirement.

Solutions to the concerns NZ First is seeking to address with its KiwiSaver policy should be sought, but not through KiwiSaver. If NZ First is concerned about the cost of student loans, perhaps they should consider extending the availability of student allowances. Concerns about a savings culture would be better addressed by improving financial literacy so that New Zealanders can have a better understanding of financial matters and take control of their financial situations. Let’s leave KiwiSaver to help Kiwis save for their retirement, as intended.


Dr Claire Matthews is a KiwiSaver expert from Massey University

ends

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On The Tokenism Of New Zealand's Role Against Islamic State

To date, the Opposition has continued to occupy itself with the marginalia of the issue. E.g. whether Key did or didn’t know whether Barack Obama would be present at the US briefing last week on IS, or whether New Zealand’s military involvement is or isn’t already a fait accompli.

It might be better to tackle the issue, head on. Our contribution against IS will be to send SAS forces to train the Iraqis? That’s like offering trainers to General Custer just as the 7th cavalry reached the Little Big Horn.
More>>

 

Parliament Today:

Scoop Business: Shell And Todd Caught Drilling Without Approval

Multi-national oil company Shell’s New Zealand arm and local energy giant Todd Energy have breached the new law governing New Zealand’s Exclusive Economic Zone, the Environmental Protection Authority says in an Oct. 10 document released by the Green Party. More>>

ALSO:

Labour: Tea Breaks 'Gone By Lunch Time'

“How cynical that on the eve of Labour weekend, the National government is pushing through legislation that takes away the statutory right to tea and meal breaks along with collective bargaining protections, and makes vulnerable workers jobs even less secure." More>>

ALSO:

Gordon Campbell: On Pharmac, Gough Whitlam And Sleater-Kinney

We’re not at the outset of these negotiations. The outset was six years ago, and negotiators were hoping to have some sort of ‘framework’ deal finished in time for the APEC meeting in a few weeks’ time. These ‘extreme’ positions are what we’ve reached near the intended end of the negotiations… More>>

ALSO:

PM Of Many Hats: Questions, No Answers On Whale Oil

Dr RUSSEL NORMAN (Co-Leader – Green) to the Prime Minister: How many times since November 2008 has he spoken with blogger Cameron Slater on the phone and how many times, if any, has he texted him?
Rt Hon JOHN KEY (Prime Minister): None in my capacity as Prime Minister. More>>

ALSO:

Aussie Investigation Dropped: Call On Minister McCully To Pursue The Case Of Balibo Five

West Papua Action is deeply concerned at the lack of any clear outcome from the Australian Federal Police inquiry into the 1975 deaths of the ‘Balibo Five’ including NZ journalist Gary Cunningham. More>>

ALSO:

'Feed The Kids' Bill: Metiria Turei To Lead Fight On Feeding Hungry Children

Green Party Co-leader Metiria Turei is urging all political parties to support the Feed the Kids Bill which she inherited today from Mana leader Hone Harawira. More>>

ALSO:

Parliament Today: State Opening Of Parliament

The House sat at 10.30am on Tuesday before MPs were summoned to hear the Speech from the Throne in the Legislative Council Chamber. More>>

ALSO:

Tertiary Education: Students Doing It Tough As Fees Rise Again

The Government is making it increasingly difficult for Kiwis to gain tertiary education as fees continue to rise and access to student support becomes even more restricted, Labour’s Tertiary Education spokesperson Chris Hipkins says. More>>

ALSO:

Housing, Iraq: PM Press Conference – 20 October 2014

Prime Minister John Key met with press today to discuss:
• Housing prices and redevelopment in Auckland
• Discussions with Tony Abbott on the governmental response to ISIS, and New Zealand’s election to the UN Security Council More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news