Summarised by Centrist
Bryce Edwards says National’s proposed compulsory KiwiSaver policy deserves much more scrutiny than it is receiving, especially given the scale of the change.
Writing in his Democracy Briefing, Edwards says the policy would eventually move a combined 12% of most employees’ pay into KiwiSaver or equivalent retirement schemes by law.
He says the policy may help address New Zealand’s weak savings culture and thin capital markets, and includes some popular measures such as contributions for over-65s and parents on paid leave.
But Edwards argues the politics are striking.
National historically opposed compulsory savings, criticised KiwiSaver, and reduced several of its incentives while in government.
Now, with the party under pressure in the polls, it is proposing compulsory KiwiSaver, newborn auto-enrolment and a $1500 “Baby Boost”.
Edwards says the policy also raises an unresolved question about the future of NZ Super.
National insists KiwiSaver and Super are separate issues, but Edwards says compulsory private savings make it politically easier for a future government to raise the pension age, means-test Super or reduce its universality.
He cites Kōura Wealth’s Rupert Carlyon, who argued compulsion “surely means the end of universal NZ Super. You don’t need them both.”
Edwards also highlights who benefits from compulsion.
ACT leader David Seymour called the policy “an enormous gift to the financial sector”, warning fund managers would collect fees on compulsory contributions while banks could benefit if people pay mortgages off more slowly.
Editor’s note: As far as we can tell, the main incentive in compulsory KiwiSaver is the top-up from either the government or the employer. But the employer contribution is not free money. It is another cost on employers, and in some cases may simply be folded into total remuneration rather than added on top of wages.
That makes the programme less impressive than its supporters suggest. For many workers, KiwiSaver may still be useful. But as public policy, forcing more income into managed funds, while adding costs to employers and leaving the future of NZ Super unclear, looks more like a mediocre compulsory savings scheme than a serious answer to New Zealand’s retirement problem.
