You get the feeling Bill English really wanted to abolish KiwiSaver rather than remove many of the scheme's underlying incentives - shrinking it was probably option two.
English was most likely being true to his feelings about KiwiSaver in a press release put out this Tuesday, revealing thegovernment's tax cuts .
"People know best what to do with their own money. They can choose to spend their tax cuts, pay off the mortgage, or invest the money for the future," English said in the statement.
This is a moot point, particularly in regard to long-term savings. People, and not just New Zealanders, have proven to be hopeless at saving for retirement, which explains KiwiSaver and the rest of the world's compulsory or tax-incentivised superannuation schemes.
Still, English's ideology had to give way to pragmatism in the face of KiwiSaver people power.
What saved KiwiSaver from the chop was almost certainly its unexpected take-up. As English noted in his announcement on Tuesday, "We have retained many of the features that have made KiwiSaver a popular means of saving for a better standard of living in retirement..." Must've hurt to admit that.
But in the release English outlined a series of sweeping changes to the KiwiSaver scheme that will immediately make it less attractive for many providers to stay in the game by slowing the build-up of funds under management.
Not many of the 30 plus KiwiSaver scheme providers have so far pulled in enough funds under management to be operating profitably. Some would have been hanging in for the long-term growth that a 'four plus four' contribution rate would have brought to the KiwiSaver market. A total 8 per cent contribution rate, which it would have been by 2011 under the original scheme, would have supported more providers and therefore given New Zealanders more choice.
I expect we'll soon see some of the smaller KiwiSaver providers giving up - either by merging or selling their funds to larger providers - why stick around for 4 per cent?
