A guest post by Michael Littlewood:
According to a report in the Herald on Friday (Labour backs off compulsory KiwiSaver accessible here), Labour is re-considering its KiwiSaver policy. It wants to consult first before making it compulsory and auto-enrolment is now off the agenda though they still want to make it “universal”. The subtlety of that distinction escapes me. However, the whole issue would be looked at “…on a tripartite basis with business and unions…”. Labour has also apparently “scaled back on plans to lift KiwiSaver [contribution] rates significantly.” But Labour has yet to release a policy document on KiwiSaver – given the election is just six days away, there isn’t too much time left to do that.
I hope Labour’s policy document starts with some questions and looks for evidence as to what has happened with KiwiSaver so far. In a recent report that Michael Chamberlain and I released on 27 July (www.alt-Review.com) we finished our section on KiwiSaver with a list of questions:
- Is KiwiSaver working? We know that 2.8 million people have joined and that there is over $30 billion of savings, but is it working? Subsidiary related questions include: are KiwiSaver members saving more for retirement than their non-KiwiSaver peers? Are the total net financial assets of KiwiSaver members greater than the totals of non-KiwiSaver peers? In other words, is so-called ‘behavioural economics’ working in the KiwiSaver environment?
- Are New Zealanders saving enough for retirement whether or not they belong to KiwiSaver? If they are, that would undermine the case for ‘strengthening’ KiwiSaver. If they are not that should direct what changes might be needed for KiwiSaver.
- What effect has KiwiSaver had on housing ownership patterns and housing debt as between members and non-member peers?
- What effect has KiwiSaver had on remuneration patterns as between employers with/without ‘total remuneration’ policies and as between employers with preferred KiwiSaver schemes and those without. What proportion of employers have a ‘total remuneration’ policy? Has KiwiSaver affected that pattern?
- What effect has KiwiSaver had on occupational superannuation schemes? What is the overall impact of KiwiSaver on workplace-related retirement saving schemes (including KiwiSaver)?
- Who specifically benefits from the current tax subsidies to KiwiSaver (occupation types; remuneration bands; distribution by age, sex, work status etc.)?
- What effect has KiwiSaver had on the financial services industry in the last ten years and who benefits? Should New Zealand be concerned about the aggregation of KiwiSaver savings in the hands of a small number of providers, mainly the major trading banks? Note: at 31 March 2016, the trading banks had 69% of all KiwiSaver members and 71% of total assets in all KiwiSaver schemes.
Questions 1 and 2 cannot be answered without a proper longitudinal study of household assets, liabilities and incomes – we talked about that in our report here. We urge the government, whoever wins the election, to find out what’s happening at a household level before bowing to pressure from the owners of KiwiSaver schemes to increase contribution levels or even to make KiwiSaver compulsory. It just may not be necessary.