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 What’s next – allowing funds to be withdrawn to pay for medical expenses or to establish a business?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 War Crimes And The Afghan Insurgency

Truly, with friends like former defence Minster Wayne Mapp, the SAS does not need enemies. At the very least, the Hit and Run book has raised the possibility that the New Zealand SAS committed war crimes in the attack they led in Afghnistan upon the villages of Naik and Khak Khuday Dad...

Mapp’s attempted defence of the SAS on RNZ this morning unintentionally indicated that collective punishment was baked into the planning exercise for the raid, and also into how the raid proceeded on the ground. More>>

 
 

Little Heading For Court: Apology Over Donation/Hotel Contract Claims Not Accepted

Today I want to publicly apologise unreservedly to Mr Hagaman for any hurt, embarrassment or adverse reflection on his reputation which may have resulted from my various media statements. I have offered that apology to the Hagamans. More>>

ALSO:

Biscuit Tin Of Democracy: World Heritage Site Protection, Ombudsman and Equal Pay Bills Drawn

On Thursday, 23 March 2017 three places are available on the Order Paper for the first reading of a Member’s bill. The ballot was held, and resulted in the following bills being drawn... More>>

ALSO:

Emissions Plan: NZ Needs More Science, More Trees, Fewer Beasts

A combination of technology breakthroughs, much more plantation forestry, and a big switch away from pastoral, particularly dairy farming, are identified as the key elements of any approach New Zealand takes to reducing its carbon emissions to a net zero level, according to a new report sponsored by the New Zealand chapter of GLOBE, a multi-party, global parliamentary grouping. More>>

ALSO:

"Backed To Win Seats": Labour Māori Seat MPs Won't Stand On List

The Labour Party is backing a request from its Māori seat MPs to stand as electorate MPs only, says Labour Leader Andrew Little. More>>

OutsKey: John Key's Valedictory Speech

I rise to address this House for the very last time. It has been a huge privilege to have served the people of Helensville as their member of Parliament, and, of course, the people of New Zealand as their Prime Minister. More>>

ALSO:

Productivity Commission: New Models Of Tertiary Education Are Coming

The report is a broad-ranging inquiry into how well New Zealand’s tertiary education system is set up to respond to emerging trends in technology and the internationalisation of education, and changes in the structure of the population, and the skills needed in the economy and society... More>>

ALSO:

PM's Press Conference: Water Everywhere

Monday's Post-Cabinet press conference focused on water, with the Prime Minister fielding questions about the possibility pricing water taken for export. Mr English said the government was directing their water allocation technical advisory group to include export water in considerations. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news