Labour’s KiwiSaver policy

June 18th, 2014 at 3:00 pm by David Farrar

David Cunliffe announced yesterday:

“Under a government all employees aged between 18 and 65 – with the exception of students, beneficiaries and the self-employed – will be automatically enrolled in . The opt-out provision will be removed.

This means that people will lose the ability to choose how to invest their money. Some employees may have a very rational reason not to invest in KiwiSaver. They may be saving for a major purchase, or to buy into a business. They may want to pay off debt. Instead Labour is going to force them all into a savings scheme.

“Labour will retain the $1000 kick-start and government contribution of up to $521 a year.

That’s stupid. If it is compulsory, then you don’t need the kick-start or a government contribution. That’s just taxing people more to give it back to them. Those attributes were only needed to encourage people to enrol, but with compulsion makes no sense.

We will also increase the employer and employee minimum contribution rates gradually by 0.25 per cent a year over six years; rising from the current 3 per cent each to 4.5 per cent in 2021.

Which means the same drop in take home pay. That may be fine for some or most – but who force that on everyone.

 

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30 Responses to “Labour’s KiwiSaver policy”

  1. Komata (1,142 comments) says:

    Compulsion (as in ‘We will MAKE you do so, and penalise you if you don’t comply)?

    Not exactly the best way to attract votes Mr. Cunnliffe, especially as the elections are only a few weeks away.

    But, at least we now know (and we don’t forget, a trait you might care to adopt) . . .

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  2. martinh (1,164 comments) says:

    Fuken communists

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  3. CJPhoto (218 comments) says:

    It also means some people will earn more in retirement than they earn through their working life: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11276355

    Though one has to expect that a decade or so down the line, means testing will be introduced by a left wing party. This is just the primer for it.

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  4. anonymouse (708 comments) says:

    I currently have a private supernnuation scheme that both I and my employer contribute to and together we are saving 15% of my gross earnings. This will give me the ability and freedom to potentially retire a few years early if I want to, as well as allowing me to withdraw some money nearer retirement to help with my kids University studies etc,

    Labour’s policy will force me out of this and into kiwisaver where I will not be able to get any money out until whenever the current deemed age of national superannuation is.(65, 67?)

    Sorry , but this policy stinks,

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  5. dime (9,668 comments) says:

    oh cool, less freedom for Dime.

    with almost 30 years until i could claim my own money, i dont fancy my chances. thats almost 10 terms.. 1 of those will no doubt steal it for the greater good.

    ill invest my own money thanks.

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  6. Albert_Ross (270 comments) says:

    Dime, a Government is no more or less likely to “steal” money from your KiwiSaver “for the greater good” than it is to “steal” it from your other savings, or from your current account.

    Anonymouse, Labour’s policy will not “force you out” of your current arrangements in terms of preventing you from saving money anywhere other than in KiwiSaver. You want to save at 15%, you can still do so – put 9% into KiwiSaver and the rest into your existing account. Unless you think you are going to want /all/ of your savings before you reach NZS age, you’ll be no worse off overall.

    There are good reasons to oppose this policy, but these two arguments aren’t among them.

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  7. redqueen (521 comments) says:

    Well, the best bit is the pain of having 0.25% increases over a 6 year period. Just more administration and computer modifications required. A fantastic economic package, brought to you by the Labour Party.

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  8. Rich Prick (1,635 comments) says:

    With 2 million already in KiwiSaver, could some one tell me what the case for compulsion is? I can’t see one, just an opportunity for Cunliffe to blow a bit of hot wind and make some noise over in the corner.

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  9. backster (2,123 comments) says:

    Increasing the contribution rate by .25% a year will not necessarily increase a balance, as it will only offset the Capital Gains Tax on successful funds…..It is how-ever great news for Fund Managers with their gilt edged fees they will be on a bonanza to nothing.

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  10. adze (2,005 comments) says:

    A few years ago I would have been screwed by this policy. No thanks.

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  11. ROJ (104 comments) says:

    “Labour will retain the $1000 kick-start and government contribution of up to $521 a year.”

    “That’s stupid. If it is compulsory, then you don’t need the kick-start or a government contribution. That’s just taxing people more to give it back to them. Those attributes were only needed to encourage people to enrol, but with compulsion makes no sense.”

    Exactly what I have said when folk have said compulsion is good – it would be the best way to cut the cost of the scheme to the govt. So now they want the worst of both (out of this) worlds?

    Lovely plan to have more income in retirement than working – NOT! Sounds just what Grey Power would have wanted to hear from Winnie – and they don’t even realise they won’t be the individuals to benefit!

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  12. Ed Snack (1,801 comments) says:

    I think Labour believes that there are enough people who think that increasing the employer contribution won’t affect wages or take-home pay, so it is “someone else paying” again. Sadly, they’re probably correct in that view. Lots of people seem to think that by taxing companies somehow that doesn’t affect them (as employees or customers typically), and they’re wrong there too.

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  13. dime (9,668 comments) says:

    “Dime, a Government is no more or less likely to “steal” money from your KiwiSaver “for the greater good” than it is to “steal” it from your other savings, or from your current account.”

    really? pretty sure i heard winston talking about using kiwisaver funds to “buy back the assets”.

    i dont trust left wing governments.

    i also wouldnt put it past them to go – dimes rich, piece of shit has hardly anything in his kiwisaver. lets even em out.

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  14. Forrest (15 comments) says:

    What is also inequitable is that as the contribution rates increase, the drop in take home pay will be greater for those employees whose employment contracts state that their ‘employer’s contributions’ form part of their ‘Total Fixed Remuneration’. These employees’ take home pay will reduce by an additional 3% gross by 2021.
    It will be even worse for those that have currently opted out. Their take home pay will reduce by 9% of their gross pay.

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  15. OneTrack (2,823 comments) says:

    Another reason to slow down employers taking on new staff. The green-labour government locking in an escalating cost of staff.

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  16. FeralScrote (127 comments) says:

    Come on Mr Farrar,don`t be so ungrateful,this is coming from a man with an IQ of 160 ,a Harvard *cough*degree and knows absolutely what is best for you.
    Here ,let me get you a nice cold glass of koolaid …..

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  17. burt (8,035 comments) says:

    I have a KiwiSaver policy – but it’s largely irrelevant to everybody because I’ll not have a mandate to implement it. I’m just like Labour . Awww shucks !

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  18. davidp (3,558 comments) says:

    Normally when Labour announce a policy, no one notices because Dotcom is sucking up all the media attention. Now, no one notices because Cunliffe has been caught up in a donations scandal and telling lies after months worth of hypocritical smarm. There just aren’t any breaks for Labour. Altho given that most of their policies have been dreamt up on the way to the policy announcement, scribbled down on to a yellow post-it note, and collapse it a heap of impracticality after just a day or two… then they may well be glad that this policy won’t be subject to the normal scrutiny.

    But… Is there any chance that Liu is one of Cunliffe’s secret donors? The only way to be sure is for Cunliffe to tell us who is secret backers are.

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  19. nzbsgfan (3 comments) says:

    @Albert_Ross

    When I started my current employement 12 years ago I looked at a number of schemes. My employer offerred an attractive super scheme – and I too contributed a high percentage of my salary. One of the most important aspect of the scheme was that the total contributions (including my employers) would be available to me if I left the firm – or – was made redundant. Over the years this “nest egg” has grown considerably. I now have the peace of mind, that given a situation where I may have to leave my employment for health, economic (or other reasons) my hard earned savings are mine to re-invest as I see fit. It is MY money – MY choice. Labour, in their infinite reason would be FORCING me to put a portion of my super away until I was 65-70. By doing this, they are saying they can look after me better than I have myself – ridiculous considering all the savings I have accrued up to this point. Saving for a future is a good thing – forcing people to do it THEIR WAY is morally and ethically wrong. And I know a lot of people who feel the same way about Labour’s poorly thought out plan.

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  20. NK (1,138 comments) says:

    Geez, their money tree must be growing really well.

    Labour expects auto-enrolment would bring a further half a million people into the scheme and would retain the $1000 kickstart and government contribution of up to $521 a year.

    If compulsory entry happens in the first year, that’s 500,000 x $1,000 = $500 million. Add in the $521 each year and it’s a further $250 million for the first year and each year thereafter!

    Pretty easy when you’re printing it.

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  21. Albert_Ross (270 comments) says:

    @nzbgsfan – don’t disagree with any of that, I am just saying that people like you are not the worst affected by this policy. Labour’s scheme does not require people to save /only/ into KiwiSaver. As previously noted, if you want to save more than their proposed 9% you’d still be able to do so, and you wouldn’t have to put the extra into KiwiSaver – that much would be just as available to you as your savings are now. Such as you would have to put into KiwiSaver, you’d still have a reasonable ability to “invest as you see fit” – there is a wide range of KiwiSaver funds and fund managers to choose from. Yes, you would no longer be able to cash in the /entire/ sum of your savings before you are 65, but how likely is it that you will want to do that?

    Certainly, you can object to the loss of your individual autonomy and the insulting implication that you can’t be trusted to look after yourself, those are valid concerns. But you are unlikely to be left financially worse off overall by this policy – unlike those on lower incomes who cannot afford to save as much as 9%. They will be worse off in the short term and that may or may not be justified by the probability that they will eventually be better off in their old age.

    DPF: you might want to think a bit further about your own position on retirement and pensions. You’ve said before that you are in favour of means testing NZS, but now you are saying you are opposed to compulsory savings. Do you think you can have one without the other? Do you think people will save voluntarily if they know that the benefit of any savings will be offset by reductions in their NZS?

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  22. jcuknz (704 comments) says:

    I think it is a great idea but it needs some ‘fine print’ added …. if you move from employment the total sum is availble to start again when you regain employment … that is ‘portability’. Both starting and increases should be timed for when the employee gets a rise ..C.O.L etc. No exclusions … simple little or no income equals small or no contributions.
    While I thank Muldoon for scrapping Labour’s earlier scheme that was becuase I was excused because I was already in a super scheme … but the waffle above and news reports just illustrates the short term attitude, apparently still held, by/of the National party with regard to saving for all the platitudes about investing.
    Most of earlier posts are selfish twaddle and illustrate a serious lack of longterm thinking.

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  23. ross411 (296 comments) says:

    Every policy I hear Cunliffe announce, I wonder if it is for us the tax-paying public, or just to address a selfish whim of some Labour party member or union leader.

    This policy, as Farrar points out, makes no sense. Then there’s the no registration for trailers, caravans and motorhomes. I bet Cunliffe owns a fancy caravan, trailer and/or motorhome. Then there’s the trucks in the fast lane, I bet that’s something that’s been ticking him off for a while. And finally, forcing Kiwisaver on everyone so he has extra money to spend when he gets in power as he is destined to by both prophecy of the shrill oracles at the standard..

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  24. polemic (429 comments) says:

    Was this announcement issued from the Dear Leaders Sub or was it while they were still on the surface???

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  25. Harriet (4,616 comments) says:

    I’ve been in aussie super for 20yrs which is ‘more or less’ the model that kiwisaver is – and will end up being ever more like.

    ‘Kiwisaver’ itself will essentually just be the name of the trust where you can manage the money how you like.

    Superannuation has probably been the biggest single factor for people becoming more financialy literate and self reliant in aussie – as people get to see on their paycheck each week the total contributions their employer has made that year.

    You can invest your money in art in Aussie, or commercial property for small business people who need/want commercal property – then rent it to themselves – just about anything goes as long as the regulators see no issues. You can also borrow money for the trust to invest.

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  26. Johnboy (15,586 comments) says:

    Course everyone needs to signed up to KS.

    Makes it much easier for the Democratic Peoples Committee for balancing the books to seize all the cash after Labour/Greenie finally get control and goes broke! :)

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  27. Brett Hudson (4,736 comments) says:

    Dime, a Government is no more or less likely to “steal” money from your KiwiSaver “for the greater good” than it is to “steal” it from your other savings, or from your current account.

    No, a Labour Government will steal equally from both – they are committed to intervention in the exchange rate to drive the Kiwi dollar down. That will erode the value of your savings in KiwiSaver and your current account as the purchasing power of your dollar will drop.

    Labour want to forcibly rip your earnings from you and then devalue them before you can access them. Labour under David Cunliffe are determined to make life tougher for the average working Kiwi.

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  28. Brett Hudson (4,736 comments) says:

    Compulsion (as in ‘We will MAKE you do so, and penalise you if you don’t comply)?

    Not exactly the best way to attract votes Mr. Cunnliffe, especially as the elections are only a few weeks away.

    No to worry – he’ll have forgotten he said it come tomorrow.

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  29. Sir Cullen's Sidekick (839 comments) says:

    DPF – Don’t attack. Both Cunliffe and this policy won’t see the light of the day.

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  30. Albert_Ross (270 comments) says:

    Johnboy at 8:41, see Brett at 11:09. It is entirely possible that a Labour government will want to extract more money from us for one worthless pretext or another. That is a good reason for not voting Labour, but it is not a good reason for staying out of KiwiSaver. It is no easier, or more likely, for the Government to take money out of your KiwiSaver than it is for them to take it out of any other form of wealth.

    It would be a pity if people were deliberately depriving themselves of the advantages of KiwiSaver under the mistaken impression that their money will be safer from Labour depradations if it is kept in a non-KiwiSaver account. It will not.

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