Michael Cullen is not keen on KiwiSaver becoming compulsory.
Michael Cullen is not keen on KiwiSaver becoming compulsory.
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Finance Minister Michael Cullen has given his strongest indication yet that he is not keen to see KiwiSaver go compulsory.
Following a speech to financial advisers at yesterday's annual managed funds conference Cullen was prompted by a question on compulsion and told attendees there were two main issuessurrounding it.
"Firstly the relationship between KiwiSaver and New Zealand Superannuation. If compulsion was to be introduced we would have to think about income testing New Zealand Super. That was just an awful phase in New Zealand's history."
Cullen said Australia both income and asset-tested its superannuation savings but a move like that could mean political suicide in New Zealand.
"It did not survive the first MMP election in 1998. If any Government is silly enough to move back in that direction it wouldn't take much for a minor party to make a stand on that one issue," he said.
Cullen said his other concern was that the Government should not be held liable for poor performance from KiwiSaver funds.
"One of the issues facing resistance from KiwiSavers now is the concern that 'my investment is not guaranteed'. And we say 'yes that's right'. But the record of the managed funds industry is very strong - you would be very unlikely to lose your capital investment. But more than that it is your choice - you don't have to join KiwiSaver.
"It is a rational choice not a forced choice. If we go to that model [a compulsory model] the Government finds itself in a moral situation if a fund goes belly up or underperforms and it's very hard to justify that."
Cullen said compulsion was one reason why the Australian Government was trying so hard to regulate its fund management industry.
Attendees were also told there would be no hand-outs by the Government to encourage KiwiSavers to seek advice but rather that it would be up to advisers to take advantage of the situation created by the introduction of KiwiSaver.
