Labour’s Kiwisaver announcement

mickysavage
10 years ago
Categories: david cunliffe, david parker, labour, superannuation
Tags: kiwisaver

David Cunliffe and David Parker have announced Labour’s Kiwisaver Policy for the election. Details are here. The headlines are:

KiwiSaver will be made universal for all workers apart from the self employed. Students, beneficiaries and those with an income below a yet to be set level will be exempt. Labour intends to continue with the growth in the minimum wage to maximise cover.
the $1,000 Kick-start and government contribution of up to $521 a year will be retained and will apply to all new enrollments.
The employer and employee minimum contribution rates will increase gradually by 0.25% a year for six years from 3% each currently to 4.5% in 2021.
As previously announced variable Kiwisaver contributions will be used as a tool to control inflation rather than just relying on interest rates, meaning people pay more into their savings instead of more in interest.

The justification for the policy is as follows:

New Zealand has chronically low savings. Many New Zealanders retire with little more than the government superannuation to live on. An increasing number don’t even own the home they live in. Without a savings pool, retirement can be about scraping by, rather than enjoying life.

Our small savings pool also means our businesses have to turn to overseas lenders and investors when they need capital to grow.

The result is that New Zealand has high international debt and a large part of our economy is owned by overseas investors. As a country, we send nearly $10 billion a year offshore in dividends and interest payments.

KiwiSaver is helping to turn this situation around. Our domestic savings are growing. Over $21 billion is now invested in KiwiSaver and over 2 million New Zealanders have joined the scheme.

But KiwiSaver is incomplete.

There are still around half a million wage earners who aren’t members. These are predominately people on lower incomes. They are missing out on receiving up to $521 a year in government support for their savings and matching contributions from their employer. This risks creating two classes of retirees: those who can live well by drawing on their KiwiSaver and those who only have government superannuation to fall back on.

Stand by as the right try and pick holes in the policy or suddenly develop a sympathy for the lowest paid amongst us.