NZers support compulsion for KiwiSaver scheme, survey shows
By Paul McBeth
Aug. 18 (BusinessDesk) – The majority of New Zealanders support some form of compulsory KiwiSaver membership though almost a third are distrustful that a government could change the rules to their disadvantage, a new survey shows.
Massey University research, commissioned by trans-Tasman financial services association Finsia and the Institute of Financial Advisers, shows New Zealanders have rallied behind the scheme, with 57% of 1,001 respondents supporting some form of compulsory KiwiSaver membership.
Of those people surveyed who hadn’t joined, almost 30% said they didn’t trust the government not to change the rules again. Finsia commissioned the research after the government reduced incentives for people to sign up to the scheme, and chief executive Russell Thomas says the lack of certainty over KiwiSaver’s future leaves it at risk of fragmenting and losing momentum.
“Even if changes weren’t made to KiwiSaver and there was a bipartisan commitment to extend it over time, you will still be facing a very serious fiscal challenge,” Thomas told BusinessDesk. “There’s a need for the government to stay the course (with the scheme) – it’s still early stages, but that’s at risk of being substantially eroded.”
In the May budget, the government cut its annual contribution in half, having already removed the employer’s tax break a year earlier. It tried to offset that with a 1 percentage point increase to the minimum employee contribution and the compulsory employer contribution to 3% from 2% starting April 1, 2013
More recently, Prime Minister John Key mulled whether to automatically enrol all people into the scheme, forcing them to opt out if they didn’t want to join. In 2008, Key campaigned on leaving the pension scheme untouched, pledging to resign from Parliament if entitlements were tinkered with.
The government spent $8.07 billion on New Zealand superannuation in the 11 months ended May 31, almost 41% of all spending on social assistance and just shy of 13% of core expenses in the period, according to the Crown’s financial statements.
Thomas said KiwiSaver provides a way to help offset the cost of a looming superannuation bill. The number of pension-age people is forecast to rise to one-in-five by 2031 from one-in-eight in 2008.
That statistic has kept bodies including the Treasury, International Monetary Fund and the Retirement Commission pressing the government for action on the levels and age of entitlement for New Zealand’s universal superannuation or to seriously the trade-offs required to keep the current system operating.
The Treasury has estimated GST would have to rise to 19% or personal taxes would need to increase by $30 a week from early next decade to maintain the current system. Alternatively, the government could slash total spending by about 7.5% from the early-2020s.
The survey shows more than 90% of those polled said the $1,000 kickstart subsidy was important or very important, and more than 80% saying the same about the member tax credit. About 54% of those aware of the government reducing incentives thought the scheme had been weakened by them.
“These concerns about government involvement suggest a need for a bipartisan approach, and a commitment to maintaining KiwiSaver and its structure,” Matthews said in her report.
With more than 1.7 million people signed up to the savings scheme, and a forecast for membership to rise above 2 million next year, that represents a significant amount of the workforce in the scheme, which was 2.2 million at the end of June, according to the latest government data.
Finsia’s Thomas said the research didn’t broach the wider questions around New Zealand superannuation, though any major changes would mean the universality of the current pension and the level of payments would have to be revisited.