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 What’s next – allowing funds to be withdrawn to pay for medical expenses or to establish a business?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

Education: Primary School Teachers On Strike Again Today

More than 100,000 primary school students in Auckland will be home from school today as teachers and principals walk off the job for the second time this year.

It's the start of a week of rolling one-day strikes around the country, after the collapse of contract negotiations last Thursday.

Several rallies are being held across the city this morning, leading to more than 100,000 students missing school today. More>>

 

"Process Was Sound": Inquiry Into Haumaha Appointment Released

The Inquiry’s purpose was to examine, identify, and report on the adequacy of the process that led to the appointment. It found the process was sound and no available relevant information was omitted. More>>

ALSO:

Govt Loses In Supreme Court: Call For Debate On Prisoners' Right To Vote

The court earlier this week upheld a High Court decision which found that a law restricting a prisoner's right to vote was inconsistent with the Bill of Rights. More>>

ALSO:

Shenanigans: NZ First Accepts Jami-Lee Ross Proxy Vote

The New Zealand First caucus strongly believes that in terms of the Electoral Integrity Amendment Act, that someone in Mr Ross’ position should resign his seat... the New Zealand First Whip will use Mr Ross’ proxy–to be exercised at all times in support of the vote of the National Party... More>>

ALSO:

Call For Conversation: Do You Know What Data Is Being Collected About You?

New Zealand Maori Council has called on a national conversation when it comes to data sovereignty asking the question “just how many people know what data is being collected, why and how is it being used?” More>>

Economic Policy: Gordon Campbell On The Aussie Banks And Their Profits

Some folk rob you with a six-gun, as Woody Guthrie once memorably put it, and some rob you with a fountain pen. And some do it in broad daylight without blinking, while the government looks on impotently. More>>

ALSO:

Drug Law: Cost Benefit Analysis Shows Reform Stacks Up

Both decriminalisation of drugs and introduction of a strictly regulated market for cannabis are fiscally positive. Shifting away from a punitive response to drug use would significantly reduce costs in the criminal justice system. More>>

ALSO:

Strike Looms: DHB Midwives Reject Pay Offer

More than 1100 District Health Board (DHB) employed midwives have voted overwhelmingly to reject the DHBs’ pay offer and to go on strike... Industrial Co-leader Jill Ovens says the idea is to maximise disruption for the DHBs while minimising the effect on women and their babies. More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels