That is not how he put it.
He announced that employee and employer KiwiSaver contributions will rise to 4 percent each and that KiwiSaver will be compulsory.
Yet that is the practical effect.
Today, around 60 percent of KiwiSaver funds are invested overseas. Some schemes invest considerably more. If those investment patterns continue, around $12 billion would flow offshore each year, with around $8 billion invested in the United States.
For retirement investing, that makes sense.
New Zealand is a small economy. Concentrating retirement savings in one country is risky. American shares have produced extraordinary returns. Tonight, millions of KiwiSaver dollars will ride the SpaceX share-price rollercoaster.
It is one thing for individuals to choose to back America's AI boom with their retirement savings. It is another for the Government to require everyone to do so. Today, more than a third of the S&P 500 is represented by just seven giant technology companies. Is financing America's AI revolution really New Zealand's highest investment priority?
New Zealand has an infrastructure deficit estimated at more than $100 billion. We need roads, hospitals, electricity generation, water systems and housing. Yet we are told there is a shortage of domestic capital while we have created a system that channels an ever-increasing share of our savings overseas.
Will compulsory KiwiSaver even increase New Zealand's savings?
Many economists believe compulsory savings schemes largely change where people save rather than how much they save. Money that might have gone into paying off a mortgage, buying a rental property, starting a business or investing directly is instead channelled through managed funds.
There is now over $120 billion in KiwiSaver, but is New Zealand any wealthier? Much of that capital would probably have existed anyway. It would simply have been invested differently.
Despite those arguments, I recommend savings-based superannuation. Relying on the government for your retirement income is far too risky.
Saving a combined eight percent is closer to what we should be putting aside for retirement. To take advantage of compound interest, the earlier we start the better.
The difficulty is compulsion.
Almost half of us reportedly have no emergency savings.
For retirement investing, that makes sense.
New Zealand is a small economy. Concentrating retirement savings in one country is risky. American shares have produced extraordinary returns. Tonight, millions of KiwiSaver dollars will ride the SpaceX share-price rollercoaster.
It is one thing for individuals to choose to back America's AI boom with their retirement savings. It is another for the Government to require everyone to do so. Today, more than a third of the S&P 500 is represented by just seven giant technology companies. Is financing America's AI revolution really New Zealand's highest investment priority?
New Zealand has an infrastructure deficit estimated at more than $100 billion. We need roads, hospitals, electricity generation, water systems and housing. Yet we are told there is a shortage of domestic capital while we have created a system that channels an ever-increasing share of our savings overseas.
Will compulsory KiwiSaver even increase New Zealand's savings?
Many economists believe compulsory savings schemes largely change where people save rather than how much they save. Money that might have gone into paying off a mortgage, buying a rental property, starting a business or investing directly is instead channelled through managed funds.
There is now over $120 billion in KiwiSaver, but is New Zealand any wealthier? Much of that capital would probably have existed anyway. It would simply have been invested differently.
Despite those arguments, I recommend savings-based superannuation. Relying on the government for your retirement income is far too risky.
Saving a combined eight percent is closer to what we should be putting aside for retirement. To take advantage of compound interest, the earlier we start the better.
The difficulty is compulsion.
Almost half of us reportedly have no emergency savings.
For those households, a blown transmission or a broken washing machine is a financial disaster.
For many of these families, KiwiSaver has undoubtedly increased retirement savings, but at what cost? A country with 120,000 young people outside education, employment and training should first get them into work. Employment is the best retirement policy ever devised.
Politicians believe they are better judges of our priorities than we are.
Had KiwiSaver been compulsory, I could never have bought my first home.
The bank turned me down the first time. Even after getting a mortgage, every repayment was a struggle.
Buying that house was one of the best investments I ever made.
I had a friend with an incurable inherited disease. He knew it would first leave him blind and then kill him. Should the Government have made him save for a retirement he knew he would never see?
Who is the Government to tell the tradesman wanting to buy equipment, the entrepreneur starting a business or the farmer paying off debt that their priorities are wrong?
Compulsion is not the only way to encourage saving.
When I was born, my grandfather opened a Post Office Savings Bank account and deposited five pounds, about half a week's wages.
I cannot say it made me thrifty. But when I later earned money on a newspaper round, I had somewhere to save it.
After a family friend gave money for one of my grandchildren, I discovered how difficult it is to open a bank account and a KiwiSaver account for a child.
National's proposal to give every newborn a $1,500 KiwiSaver contribution matters less than ensuring every child has both a KiwiSaver account and a bank account from birth.
Parents, grandparents and family friends could gradually build savings throughout childhood. That would encourage a culture of saving without forcing anyone to do so.
It would also create lifelong customers for banks and KiwiSaver providers.
Only government can remove the regulatory barriers that government itself created.
We are told compulsory KiwiSaver is the answer to the rising cost of National Superannuation.
Eventually it will be—but not for decades.
Today's superannuation bill must be paid.
The major parties can solve that problem, but only together. For years National and Labour had an accord on superannuation that meant a National Super sustainable.
Another accord could do so again. Instead, they refuse to lead and then wonder why public confidence in politics keeps falling.
Government should encourage New Zealanders to save. Lift KiwiSaver contributions to 4 per cent but let people opt out. Make saving easier by opening a bank account and a KiwiSaver account for every child.
But trust us to decide whether paying off a mortgage, building a business or saving for retirement is the right priority for our families.
For many of these families, KiwiSaver has undoubtedly increased retirement savings, but at what cost? A country with 120,000 young people outside education, employment and training should first get them into work. Employment is the best retirement policy ever devised.
Politicians believe they are better judges of our priorities than we are.
Had KiwiSaver been compulsory, I could never have bought my first home.
The bank turned me down the first time. Even after getting a mortgage, every repayment was a struggle.
Buying that house was one of the best investments I ever made.
I had a friend with an incurable inherited disease. He knew it would first leave him blind and then kill him. Should the Government have made him save for a retirement he knew he would never see?
Who is the Government to tell the tradesman wanting to buy equipment, the entrepreneur starting a business or the farmer paying off debt that their priorities are wrong?
Compulsion is not the only way to encourage saving.
When I was born, my grandfather opened a Post Office Savings Bank account and deposited five pounds, about half a week's wages.
I cannot say it made me thrifty. But when I later earned money on a newspaper round, I had somewhere to save it.
After a family friend gave money for one of my grandchildren, I discovered how difficult it is to open a bank account and a KiwiSaver account for a child.
National's proposal to give every newborn a $1,500 KiwiSaver contribution matters less than ensuring every child has both a KiwiSaver account and a bank account from birth.
Parents, grandparents and family friends could gradually build savings throughout childhood. That would encourage a culture of saving without forcing anyone to do so.
It would also create lifelong customers for banks and KiwiSaver providers.
Only government can remove the regulatory barriers that government itself created.
We are told compulsory KiwiSaver is the answer to the rising cost of National Superannuation.
Eventually it will be—but not for decades.
Today's superannuation bill must be paid.
The major parties can solve that problem, but only together. For years National and Labour had an accord on superannuation that meant a National Super sustainable.
Another accord could do so again. Instead, they refuse to lead and then wonder why public confidence in politics keeps falling.
Government should encourage New Zealanders to save. Lift KiwiSaver contributions to 4 per cent but let people opt out. Make saving easier by opening a bank account and a KiwiSaver account for every child.
But trust us to decide whether paying off a mortgage, building a business or saving for retirement is the right priority for our families.
The Honourable Richard Prebble CBE is a former member of the New Zealand Parliament. Initially a member of the Labour Party, he joined the newly formed ACT New Zealand party under Roger Douglas in 1996, becoming its leader from 1996 to 2004. This article was sourced HERE
No comments:
Post a Comment
Thank you for joining the discussion. Breaking Views welcomes respectful contributions that enrich the debate. Please ensure your comments are not defamatory, derogatory or disruptive. We appreciate your cooperation.