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 What’s next – allowing funds to be withdrawn to pay for medical expenses or to establish a business?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

#SaveCampbellLive : Mediaworks Delivered 104,000 Petition Signatures At TV3's Newton HQ
#PonyTailGate #TailGate Full Coverage

Pukeahu Park : ANZAC 100th Anniversary Dawn Service In Pictures

Roughly 18,000 people gathered this morning at Pukeahu Memorial Park for the Anzac day centenary. Anticipating the large turnout, patrons arrived as early as 4.30. It was virtually impossible to get near the Memorial after 5am. By 6, the crowds on Taranaki Street had stretched as far back as the Z Petrol station.

The screens erected around the park displayed the live events to those who had turned up. The heat generated by the huge number of people caused many to take a turn. Medics and ambulances were on hand for the fainting crowd members. Only twenty minutes into the ceremony, one medic said they had already dealt with 15 to 20 spells. More>>

 

PARLIAMENT TODAY:

War: What’s To Commemorate?

Gordon Campbell in Werewolf: Is there anything that can be validly commemorated on this 100th anniversary of Gallipoli? Beyond, that is, a fleeting sense of empathy with the thousands of soldiers killed or wounded on April 25 1915 and in the months thereafter, until the whole thing was finally called off in December 1915. More>>

MORE IN WEREWOLF:

ALSO:

Peter Ellis Case: Minister Declines Request For Commission Of Inquiry

Justice Minister Amy Adams has declined a request from supporters of Peter Ellis for a Commission of Inquiry on the basis that an inquiry cannot be used to determine the liability of any person. More>>

Quakes: New Process For Red Zone Crown Offers

Canterbury Earthquake Recovery Minister Gerry Brownlee has announced a process to give everyone a say on the Crown offers to owners of vacant, commercial/industrial and uninsured properties in the Residential Red Zone. More>>

ALSO:

Gordon Campbell: On The Battle Obama Is Waging Over The TPP

For the past two and a half years, this column has been arguing that the fate of the Trans Pacific Partnership (TPP) deal will hinge on whether US President Barack Obama can win Trade Promotion Authority (TPA) from Congress... Last week, the White House finally, finally unveiled a draft TPA Bill. More>>

ALSO:

Greens: Govt Breaks Free Doctors Visit Promise To Kids

Documents obtained by the Green Party show that the Government decided to fund only 90 percent of doctors’ visits for children suffering from an injury in an attempt trim the cost of the so-called “free” visits. More>>

ALSO:

Other Wars: Extension Of NZDF Commitment In Afghanistan

The New Zealand Defence Force’s commitment of mentors and support staff to the Afghan National Army Officer Academy in Afghanistan has been extended out to December 2016, Defence Minister Gerry Brownlee says. More>>

PM's Press Conference: Auckland Property Prices Increasing "Too Rapidly"

John Key accepted that Auckland property prices 'are going up too rapidly” in a press conference held today in Wellington, however he said that this is not anything new. More>>

ALSO:

Press Conference: ANZAC PMs Concerned About ISIL Bringing The War Home

Prime Minister Key and Prime Minister Abbott spoke of the bond formed between Australia and New Zealand in the “baptism of fire” of Gallipoli. Abbott stated that New Zealand and Australia’s values and interests are linked, and this is reflected in the joint operation in Iraq which will begin shortly. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news