Small business industry leaders says National's small business policy to allow Kiwis to withdraw up $20,000 from their KiwiSaver to start a business is a smart move - but retirement experts warn it is risky.
On Wednesday morning, National Party leader Judith Collins announced the Business Start policy would make it easier for people who have lost their jobs due to Covid-19 to start their own business - with access to KiwiSaver and tax breaks, totaling at least $30,000.
Collins said the move to allow New Zealanders to dip into their KiwiSaver fund, which most currently have no access to until they are 65, would enable people to take control of their own future and help in reducing mass unemployment.
National predicts that up to 500,000 Kiwis could be unemployed by Christmas. But NZIER predicts it will only be 169,000 by Christmas.
Other economists expect about 200,000 will be unemployed by the end of the year.
Some commentators see no difference in withdrawing funds for entrepreneurial endeavours or to secure a first home, but KiwiSaver expert Claire Matthews of Massey University says there was a big difference and she would not support the policy.
"It is again using KiwiSaver in a way that it was not designed to be, it is designed for retirement, not designed as simply a saving scheme. When you start using it for other purposes it confuses matters," Matthews told the Herald.
"A house is different because a house makes a big difference in terms of retirement, we know that people in retirement who have their own home are much better off - withdrawing money to set up a business doesn't have anything like the same value in terms of your retirement.
In most instances, money taken out of KiwiSaver was not normally replaced, she said.
"A first home is acceptable as a withdrawal, any other purpose for a withdrawal is simply muddying the waters."
But Collins said, under a National government, the scheme would address a crisis of "mass unemployment" and be in place for 17 months.
Under National's scheme people setting up a business who have been made redundant will be able to use the taxed portion of redundancy as a tax credit with Inland Revenue to pay GST on the business – for example $50,000 on a redundancy payment of $150,000.
To be eligible, those who have lost their jobs since March 1 would need a business plan signed off by a chartered accountant or a registered financial adviser - and they would receive $1000 towards that professional help.
The business plan would then need to be signed off by the Ministry of Business, Innovation and Employment before becoming eligible for Business Start.
Those who didn't have redundancy for a tax credit could receive a $10,000 tax credit – $5000 on day one and another $5000 after 90 days.
Collins billed the policy as a companion to National's Job Start policy, announced in May, that would provide $10,000 cash grants to every New Zealand business, for every new permanent full-time employee hired – up to 10 new staff, or $100,000 per business – after November 1.
Sue de Bievre, chief executive of small business accounting platform Beany, said it was up to an individual to make a personal risk assessment.
Not touching the funds until retirement was a lower risk, but offered a lower return.
"At the end of the day, it's [your] money and I think you should be able to make those calls for yourself, and right now, if you've just lost your job and you've got a fantastic business idea, why not have that capital available to invest in a business idea now," de Bievre said.
"I'm sure there will be some people who lose their money - that's business reality - I just think at this moment you can't necessarily remove people's right to choose how they want to invest their own money.
"Whether you have savings in a bank account or savings in your KiwiSaver - it makes no difference, it's just savings in different pots."
While dipping into your retirement savings to start a business was high risk, Craig Garner, director of Think Learning and formerly of Business Mentors, said the proposal to allow access to KiwiSaver funds was a "fantastic" idea.
"It is difficult for small business people to get access to money and if they can use their money to make a better business that has got to be a good thing," Garner said.
"If someone can make a success of their business, it gives them choices - a home is an investment, and as Kiwis we always have the view, that mentality, that home is security, but building a solid business is security too - and a home isn't going to employ people, or earn you money in the way a business can.
"Our economy is built on businesses, not houses."
Garner said it would also give New Zealanders who are already self-employed more options. "Now is the time that we need to invest in business - these are unusual times - and we have to think differently about how we approach [KiwiSaver]."
Business Mentors NZ chief executive Sarah Trotman said the Business Start policy would be beneficial if it was extended to existing business owners and their spouses.
"There are business owners that have already proven the competency to run a business that would need access to their KiwiSaver, and potentially their spouse being able to access it as well," Trotman said.
"It is a great idea to be able to access KiwiSaver, but it needs to be cautioned if you have never been in business before," she said.
Murray Harris, head of KiwiSaver at Milford Asset Management, said it was crazy that people kept suggesting that KiwiSaver be accessed for everything but retirement savings.
"Talking about $10k or $20k sounds like a small amount but it would add up to a lot at retirement."
Harris said taking that amount of money out could meant a person had $40k less in their account by the time they came to retire.
"It is a significant amount of money."
Harris suggested a better idea would be to give every KiwiSaver member $500 to get good advice on which KiwiSaver fund to invest in.