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Destroying a savings culture

Written By: - Date published: 10:51 am, June 25th, 2015 - 36 comments
Categories: bill english, john key, kiwisaver, superannuation - Tags: , , ,

John Key, 26 May 2015:

“The removal of the $1,000 kick-start contribution will not make a blind bit of difference to the number of people who join KiwiSaver.”

Yesterday:

KiwiSaver enrolments drop by half after National axes sign-up payment

…ANZ, which has a 26 per cent share of the KiwiSaver market, said that in the month since the measure had been announced, enrolments had dropped by “more than 50 per cent”.

More brilliant economic insight and management from Key and English. It’s not enough that suspending contributions has cut $17bn in value from the Super Fund, now the Nats are hard at work destroying any hint of a savings culture in NZ. Outstanding. (I/S at No Right Turn has some questions to keep an eye on.)

36 comments on “Destroying a savings culture ”

  1. Puckish Rogue 1

    What a load of bollix, kiwisaver is still a pretty good scheme even without the $1000 kickstart so if the people are too dumb to realise that well thats their problem

    • Macro 1.1

      Are you completely ignorant or just plain stupid?
      If a kid starts “work” two days a week on the minimum wage, (and for a large majority that is what constitutes “employment” these days) – just how long do you think it will take them to accumulate that $1000? If that $1000 is in there to start with, and earning interest – well then – there is more of an incentive to add to it is there not? At least that would seem to be the reaction of the 7,500 who just decided not to start. Remember compounding interest actually takes a long time to build up a substantive total. The growth curve is fairly flat for the most part and if you start with a very small amount – don’t expect it to suddenly grow overnight.
      Here is a picture of one – just in case you haven’t seen one before:
      https://en.wikipedia.org/wiki/Exponential_growth#/media/File:Exponential.svg

      These people aren’t dumb – the dummies are the people like you.

      • Chooky 1.1.1

        +100

        • Puckish Rogue 1.1.1.1

          You do know the employers contributions are still there

          • McFlock 1.1.1.1.1

            You do know that if you lower the quality/increase the price of something, demand will drop.

      • Puckish Rogue 1.1.2

        As I said even without the $1000 kick start its a good scheme, people are just greedy and want everything for nothing

        • You_Fool 1.1.2.1

          “people are just greedy and want everything for nothing”

          You realise that this $1000 is actually our money. It was almost akin to a tax cut and so the dropping of it is actually taking money away from hard working tax payers who now are paying more tax…

          So there was never any anything for nothing as the $1000 wasn’t just magiked out of nowhere (although with Borrow and spend National I wouldn’t be surprised)

    • if the people are too dumb to realise that well thats their problem

      Remind me again what the rationale for introducing Kiwisaver was? Something about national rates of saving?

      And that was seen as a problem for all of us.

      • Puckish Rogue 1.2.1

        You can’t legislate against stupidity, its still a good scheme

        • Puddleglum 1.2.1.1

          I wouldn’t call it ‘stupidity’ myself, but whatever it is called it’s pretty clear that you certainly can legislate against it.

          Remember that we’re talking about behaviour not some supposed internal cognitive and intellectual capacity.

          Even in the latter case I’d still argue that decent legislation can at least positively affect it at the population level.

          Internal cognitive and intellectual capacity is not simply ‘innate’, as anyone who understands what ‘heritability estimates’ actually mean will know.

    • Lanthanide 1.3

      For me, the $1,000 kickstart was pretty meaningless. But that’s because I have a salary in the top 5% already.

      For people earning minimum wage, $1,000 is a lot.

      • Puckish Rogue 1.3.1

        Ok but when you consider the govt rebate and the employer contribution its still a pretty good scheme

        • Lanthanide 1.3.1.1

          Again, assuming your employer pays it on top of your existing salary / wage.

          National made it allowable for employers to incorporate it into a “total remuneration” package, which means instead of 3% from your salary + 3% bonus from employer, it’s just 6% from your salary. Although if you’re on the minimum wage, the payment must be in addition to this.

          So if you’ve got a crap employer, the only thing left is the government tax “rebate”, which requires employee contributions of $1,042 a year to get the full benefit from – this requires you to be earning at least $16.70/hour to reach at the 3% contribution rate, otherwise you’ll have to do a voluntary top up.

          There’s actually very little in Kiwisaver, that was created by Labour, that National hasn’t tinkered with.

          • Draco T Bastard 1.3.1.1.1

            There’s actually very little in Kiwisaver, that was created by Labour, that National hasn’t tinkered with.

            Well, I suppose that they couldn’t just go round canning it like Muldoon did as it has proven popular so they’ve just moved in small steps and made it useless.

  2. For the banks to succeed they have to make saving impossible. Their currency is debt. If we bypass their system and save our earnings we are destroying their system. John Key is a Wall Street banker first and foremost and this is his goal. Next will be making cash illegal and economic systems outside of the banking system impossible. But conspiring? Neh, Our government loves us!

    • Jones 2.1

      The Kiwisaver money is going to the banks anyway. Whether through fees and sleight of hand accounting tricks, use of derivatives and a shadowy banking system, when the time comes to collect we will find there’s nothing in Kiwisaver. It will have been cleaned out as the funds will have been offered as collateral for some high risk gamble (sold as extremely low risk) gone bad.

      On making cash illegal… we’re seeing it overseas and given these neo-lib Governments (or Corporate Policy Implementation Departments) practice of standardising their policies globally, there’s a strong likelihood of it coming here. But I think it will start as cash transactions over a certain value… for example, it will be illegal to pay for a $2,000 car in cash. We may also see a requirement for banks to notify the Government if large amounts of cash are withdrawn and a higher Withholding Tax on savings.

    • Draco T Bastard 2.2

      Next will be making cash illegal and economic systems outside of the banking system impossible.

      Making cash illegal isn’t the problem. It’s how it’s done. We need to reform our financial system so that we’re not beholden to the banks first by banning them from creating money. Then we need to set up our own internal system that maintains all NZ$ and then we can look at making cash illegal.

      • Mike S 2.2.1

        Yep. Banks should be publicly owned, non-profit institutions that help us manage our money and business transactions. All loans should be interest free with the public banks only charging to cover their expenses so as to not cost taxpayers (or ratepayers if locally owned) any additional money. Usury should be outlawed and money changed from being viewed and used as a commodity to simply being a tool to help facilitate our trade in goods and services.

  3. shorts 3

    I can’t help but wonder how many people were eligible to join in that month?
    For once I agree with key (as much s it pains me) as people forget the incentive to join the levels will go back to something similar to what they were for as PR above says – its a good scheme, especially given how hard we kiwis find it to save

    saying that the change was simply mean spirited and typical of this govt

    • The need to opt in is itself an obstacle to enrolment.

      Without the incentive it is not surprising that more people simply carry on without joining. It’s the default setting and their life and spending is set up for that.

      I can’t see why people would suddenly start joining again once they “forget the incentive“.

      That seems highly counterintuitive and goes against the general finding about rates of opting in that I mentioned above.

      It’s the same – but in reverse – as those letters people receive from their banks telling them that their credit limit has been increased on their credit card – and that they don’t need to do anything, unless they want to opt out of the increased limit.

      • shorts 3.1.1

        those joining the workforce at a certain income level will join for the employer contribution – that makes sense, even if the 1K incentive off the bat has gone

        Those on low incomes won’t join as the 1000 was their only real buy in and now its gone

        • Puddleglum 3.1.1.1

          Good points.

          The employer contribution is an incentive (which shows the efficacy of incentives).

          An additional incentive (the kickstart) may well have a reduced marginal return in comparison but would presumably still have an effect on enrolment rates.

          That’s especially true since the $1000 would be ‘money in the bank’ that someone could immediately see in their account.

          That immediacy is likely to have additional motivational value over and above future contributions from an employer.

          Humans are not (yet) the disembodied ratiocinators some believe them to be – or, scarily, believe they should be.

  4. Charles 4

    All the figures are irrelevent without several other (unoffered by story) trend-points of reference to compare to. How ANZ can say that a 50% drop in new employment-conditional savings was totally caused by a policy decision made a month ago is mind-boggling. Bizarre. Clearly not the people to go to for investment advice.

    Then IRD say their figures are a net increase, but if we accept that, then every month since the last few, new jobs have been increasing by 15,000 per month. Holy Moses, full-employment here we come!

    Because remember, if you’re already in Kiwisaver, you’re in, it rolls over – net increase would have to be new sign-ups. And that means either a shitload of new jobs by people not previously employed or signed up, or people already employed and signing up regardless, so that means ANZ are FIBBING.

    AH but wait… maybe not full-employment after all, maybe just really seriously high “churn” of “eighty-nine day or less” jobs: If you opt out, it takes 6 weeks or so to turn over the paperwork. And if you’re in a 90 day trial situation, and don’t stay employed, you may never hit the system at all. It’s hard to say how those people accounts appear on IRD internal systems, Live one week, dormant the next.

    Both organisation’s figures are clearly bunkum. ANZ because (searches for conspiracy…) they’re scared of “losing” money and want compensation from Govt. and IRD because… well who cares. The good news is Bill English is saying things using the same attitude that Helen did before she was voted out of office.

  5. Grant 5

    How many children are usually signed up during that time period? Maybe parents aren’t signing their kids up because no point without 1k kickstart.

  6. Colonial Rawshark 6

    You need a surplus level of income in order to save, and for 50% to 60% of NZers that was a non-starter to begin with.

  7. Heather Grimwood 7

    I wholeheartedly agree with those above who’ve stated that $1000 start to ‘get in’ to Kiwisaver was a huge help for many young ( and not-so-young) people. Those why deny this fact have no idea of what is reality for a large proportion of New Zealanders.

  8. Draco T Bastard 8

    Is putting money aside so that it can get unearned income actually a ‘savings’ culture or is it the culture that is destroying the Earth’s ecology and taking us with it?

    IMO, it’s the latter.

    • dreamer 8.1

      The savings culture is based on the illusion you can get through life without relying on the unpaid assistance of others. The Earth’s ecology is ever changing and we are temporarily part of it. Destructive or otherwise.

  9. Reddelusion 9

    Draco please stop using you PC, laptop iPad or what ever, it is an assault on the earths ecology,

    • Draco T Bastard 9.1

      Reddelusion, please stop trying to communicate – it’s an assault on other peoples’ sanity.

  10. b waghorn 10

    I’m sure some of the more numerically literate people here could do the sums but I’m going to hazard a guess that a person who is 20 when they join would have many times the initial $1000 paid to the tax man out of there kiwisaver over the next 45 years.
    So really the kick start was just a short term loan from the tax payers to help people on the way.

  11. infused 11

    Make it compulsory. Problem solved.

  12. georgecom 12

    Norm Kirk Super Scheme – canned by National
    The Cullen Fund – contributions suspended by National
    Kiwisaver – Kick start scraped by National, tax credit cut in half, employer contribution taxable

    A pattern of Labour implementing initiatives to improve our retirement savings, and National unwinding the schemes.

  13. Nigel 13

    I find the idea of a “saving culture” a bit bizarre, as though we ever had one.
    Saving for retirement has always been a very difficult proposition and these days yields are lower than ever.
    Retirement has been and should be paid out of current tax revenue (production) not liquidation (spending down).
    There are plenty of decent articles around on the history of the social welfare system and the idea of paying out of current surplus.

    Think about the incredible concentration of wealth and what that has done to the tax base of western countries. Any long term chart on tax rates show them falling over time. The results are all around us.

    The housing bubble (zeppelin?) in Auckland should be a warning to us how futile it is to try to “save” money. Double digit capital gains on 5% (or less) interest loans.

    There are many thousands of retired people on less than half the income they expected with interest rates falling and basically it’s impossible to save enough to retire at low rates. Think 2% for 5 yr term deposits in some places (Canada), and the income taxable.

    These thoughts are a bit random but the take home message is one of taxing fairly and widely and funding social programs including pensions out of current revenue (production).

  14. Sable 14

    You can’t make wage slaves of people who have savings…..

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