State-owned Kiwibank wants the KiwiSaver scheme to become compulsory for everyone with an income above a prescribed level.
"In our view, compulsory KiwiSaver would significantly increase retirement incomes, and therefore quality of life in retirement," Kiwibank said in a submission to the Savings Working Group.
"It would also provide a
significant savings cushion, reducing dependency on government benefits and health care - effectively lowering the fiscal cost of retirement," Kiwibank said.
It also comes out against the so-called Nordic model under which capital income is taxed at a lower rate than labour income.
"While the Nordic model is theoretically attractive, we consider it is less suitable for New Zealand," Kiwibank says. This is because the model relies on a capital gains tax, which New Zealand does not have.
It also argues that New Zealand's PIE regime provides a vehicle for taxing savings at a lower rate as savers are taxed as a maximum rate of 28 per cent compared with the top marginal income tax rate of 33 per cent.
"In short, a full Nordic model is likely to make the system more complex and we consider it would be difficult to apply in practice," Kiwibank said. The Savings Working Group might wish to consider whether prescribing a minimum amount of the New Zealand Super fund's capital to be invested onshore would help improve the depth and robustness of New Zealand capital markets and provide a platform for future growth, Kiwibank said.
A larger savings pool could also lower reliance on overseas funding.
- NZPA
