Politicians are divided over a suggestion by the Financial Services Council for an increase in KiwiSaver contributions to 10 per cent of incomes to help pay for Superannuation.
The council, which represents investment and life insurance companies, says raising KiwiSaver contributions by 1 per cent a year will enable people to still retire at 65, despite the growing costs of the scheme because of the ageing population.
There may be merit in an increase in KiwiSave contributions, but it is important to note the not inconsiderable self-interest the FSC has in the proposal. It would see KiwiSaver funds and revenue for their members triple.
Chief executive Peter Neilson said New Zealanders surveyed by the council said they could not live on the current Super payment of $349 a week.
Expanding KiwiSaver would enable them to use that saving to pay for their retirement at 65 until the future eligibility age, of perhaps 67, kicked in.
It would also enable people to double the amount they received in Super.
The trade off is not that simple. First of all, we do need to look at retirements savings as a whole. You should not treat superannuation and KiwiSaver separately. What no politicians have done is look at whether the current floor for super should be lower in future – in recognition of the level of private savings in KiwiSaver.
For someone on the average wage, they would under this proposal have a higher net income in retirement than they would have had while working. Now that is actually nuts, as when you are working you have the greater expenses, and are raising a family etc.
This is why we need a first principles review – what is the minimum and what is the desirable level of retirement savings, and how much should come from public super, from workplace super and from private super.
NZ First leader Winston Peters said the council’s call was “hopeless”.
“We offered people a straight tax-break so they could painlessly save.”
The crisis in Super was “manufactured” by certain elements in the finance sector, he said.
The council’s idea was the first step in privatising Super, Mr Peters said, but would not elaborate how.
Now this is ironic, as Winston championed the 1997 referendum which would have essentially privatised superannuation entirely.
It was fair that over 65-year-olds who were still working received the pension.
“For decades we all believed in a universal scheme whereby if you worked hard and you saved, you should not be punished.”
Why should Winston get public superannuation while an MP? That’s outrageous. And when he leaves again, he’ll get his gold plated parliamentary pension plus his public super.
Public superannuation should be used to assist those who do not have adequate savings of their own. It should not be used to give Winston an extra $15,000 a year income.