Labour sees KiwiSaver as our financial salvation
Compulsory KiwiSaver is a priority for modernising the economy and narrowing the wealth gap with Australia, says Labour finance spokesman David Parker.
Celebrating the fifth anniversary of KiwiSaver, which is seen in Labour ranks as an enduring legacy of the last Labour Government, Parker said the aim remained to get all working people (the self-employed will not be required to save) saving 9 per cent of their gross salary, ramping up at 0.5 per cent a year from the 3 per cent minimum level it will hit next year.
Unlike the age of superannuation entitlement, which Labour would lift to 67, the party would leave access to KiwiSaver funds at 65, allowing people to retire early, while creating a special benefit for those who were too clapped-out to work in their usual occupation past 65.
Parker admitted that the aim of matching Australian's wealth creation might one day require even greater levels of saving as the 9 per cent target for Labour was set as a matcher to Australia, which was now moving to require workers to put away 12 per cent of their incomes.
Also in that category is the issue of whether Labour would exempt KiwiSaver funds from the capital gains tax it plans to introduce, but he said KiwiSaver could provide a future means for delivering tax cuts.
Parker said: "One of the reasons the Australian economy performs better than ours, and its investors come over here and buy our companies, is that they have deep pools of savings capital.
"New Zealand has to modernise like Australia did. We can't keep putting off hard decisions. We need a universal scheme of our own."
National is opposed to capital gains tax, won't discuss lifting the age of Super to 67, and has postponed its idea of auto-enrolling all workers in KiwiSaver, but allowing them to opt out if they want, saying it is currently too costly.
Parker admitted that KiwiSaver alone won't end the exodus of Kiwis across the Tasman, but would help reduce the country's need to borrow from overseas. Labour had not focused on the the issue of double-dipping, where Kiwis living in Australia can come home and claim NZ Super after not having paid tax here, but with the Australian Government helping them build a large retirement nest-egg.
Kiwis returning from other countries have the income from similar government-mandated schemes taken off their NZ Super payments.
Unless New Zealand follows Australia in lifting the retirement age to 67, they could also retire here on NZ Super two years before they got access to their compulsory Australian savings.
AHEAD OF FORECAST
After five years KiwiSaver is doing better than was envisioned in projections released with the 2006 Budget.
Then it was forecast there would be 680,000 members by 2013/14, but membership is already close to 2 million.
Though the minimum savings rate was cut from 4 per cent to 2 per cent of gross salary rising to 3 per cent next year, people have ended up with more than $12.5 billion in the accounts at the end of March.
A saver earning $40,000 was projected to have somewhere between $9800 and $10,100 today. If they'd invested in one of the OnePath funds, they'd have around $13,400 today.
In the 2011-12 tax year, employees saved $1.217b into their KiwiSaver accounts. Employers chipped in $810m, and the Government chipped in $1.024b.
- © Fairfax NZ News
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