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 What’s next – allowing funds to be withdrawn to pay for medical expenses or to establish a business?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

Easter: Have A Safe Holiday And/Or Don't Mislead On Surcharges

Commerce Commission: “Businesses that do apply a surcharge must ensure people are alerted to this before they make a decision to purchase. This gives consumers the ability to decide whether they are prepared to pay a surcharge or would rather go elsewhere,” Ms Rawlings said.

“The reason for the surcharge must be accurately described and must not mislead consumers. For example a business must not claim their surcharge on Easter Sunday is because it is a public holiday, as the only public holidays over the Easter weekend are Good Friday and Easter Monday.” More>>

 

PARLIAMENT TODAY:

Law Foundation Report: New Zealand Going Backwards On Human Rights

Greens: A report released today, Fault lines: Human Rights in New Zealand, looked at our commitment to six different international human rights treaties and found New Zealand sorely lacking in our commitment to human rights in practice to the point we’re going backwards. More>>

ALSO:

War Prep: “Gerrymandering” The Iraq Deployment

NZ First: “On Tuesday, it was ‘up to 50 troops’ training in Australia but yesterday that number grew to 100... Given pre-deployment training and now integrated training with the Australian Army, it seems to go beyond the supposed training role our men and women are meant to be tasked with undertaking.” More>>

ALSO:

Gordon Campbell: On The Inadequate Response To Sexual Violence Prevention

On combatting sexual violence, the government has finally begun to undo some of the problems that were of its own making. Early in March, ACC launched the Integrated Services for Sensitive Claims scheme – a package aimed at improving the attitudes of ACC staff towards sexual violence victims, and offering them more substantive support.

Hopefully, this will help to reverse the damage done with the insensitive, punitive ACC policy put in place by the incoming Key government in 2009, which in some parts of New Zealand, saw 90 per cent of sexual violence victims being turned away by ACC. More>>

ALSO:

Child, Youth and Family Review:

"To Help Families Get Ahead": April 1 Changes Kick In

Prime Minister John Key says Paid Parental Leave, the parental tax credit, the minimum wage and Superannuation will increase, while average ACC levies will fall, and more people will be helped in to home ownership... More>>

ALSO:

Climate: Ministers Exclude Emissions From ‘Environment Reporting'

The National Party Government has today revealed that the national environmental report topics for this year will, incredibly, exclude New Zealand’s greenhouse gas emissions, the Green Party said today. More>>

ALSO:

No Retrial: Freedom At Last For Teina Pora

The Māori Party is relieved that the Privy Council has cleared the final legal hurdle for Teina Pora who was wrongfully convicted of murder and sent to prison for 22 years. More>>

ALSO:

Germanwings Crash: Privacy Act Supports Aviation Safeguards In New Zealand

Reports that German privacy laws may have contributed to the Germanwings air crash have prompted New Zealand’s Privacy Commissioner to reassure the public that the Privacy Act is no impediment to medical practitioners notifying appropriate authorities to a pilot’s health concerns. More>>

ALSO:

Treaty: Taranaki Iwi Ngāruahine Settles Treaty Claims For $67.5mln

The settlement includes a $13.5 million payment the government made in June 2013, as well as land in the Taranaki region. The settlement also includes four culturally significant sites, the Waipakari Reserve, Te Kohinga Reserve, Te Ngutu o te Manu and Te Poho o Taranaki. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news