Supercharge KiwiSaver and create a more equitable and secure financial future - Shane Te Pou

THREE KEY FACTS

• KiwiSaver funds under management reached $111.8 billion in March last year.
• There are approximately 3.3 million KiwiSaver members across 38 schemes, with over 300 different funds available.
• As of December 2023, the average KiwiSaver member had $28,800 in their account.

We’re all getting older, as the mirror likes to remind me, both as individuals and as a country.

With more of us reaching retirement age every year, it’s crucial we have financial security for our older folk.

It’s time to boost KiwiSaver and make it fairer for everyone, while also creating a greater pool of national savings to invest in infrastructure.

Now there’ll already be some people saying we’ve got to raise the age of NZ Super, like Christopher Luxon wanted to do before New Zealand First put the kibosh on it.

It’s unnecessary. It would be a step in the wrong direction.

Our public super is affordable. Retirement Commissioner Jane Wrightson says claims regarding the unaffordability of NZ Superannuation lack support from independent analysis.

Aotearoa spends considerably less on pensions compared to its peers. According to OECD analysis from 2023, Aotearoa is projected to spend only 5.5% of public expenditure on pensions in 2025, significantly below the OECD average of 9.3%.

By 2050, this figure will rise to 6.8% against an OECD average of 10.2%. Our spending is notably lower than that of most European countries, Canada and even the United States.

And we’ve already got a plan to pay for that increasing cost: the Cullen Fund. We’ve been saving and investing for more than 20 years and currently have $81.7 billion stashed away to help offset the cost of Super from the 2030s on. It would be completely unfair to tell taxpayers who have contributed to those savings that they are now going to miss out on two years of Super as well.

And the burden of a higher Super age would not be felt equally. I’m not just referring to the convenient fact that Luxon’s Super age increases wouldn’t start until after he has already turned 65.

The fact is raising the Super age hits manual workers, the low-paid, and Māori and Pasifika the hardest. For instance, the average life expectancy for a Māori male is to live just eight years past 65, so raising the age to 67 would take away a quarter of their retirement.

For younger generations, increasing the superannuation age is a tax, diminishing their future income. The Council of Trade Unions worked out that a couple aged under 44 would lose $175,206 in superannuation payments, necessitating savings of $196 every fortnight until retirement. No $20 a week tax cut would make up for that.

Kaimahi (workers) in Aotearoa already work some of the longest hours in the OECD; simply extending working years is not a sustainable solution.

We’ve got to get more people into KiwiSaver from a young age and make it fairer.

So let’s boost KiwiSaver instead.

Not only would that give older people more to live on; it would increase our pool of domestic capital.

You’ve heard this Government talking about needing to bring in more overseas money to pay for infrastructure such as new roads, fixing the pipes and building more electricity generation.

But using overseas money to build that infrastructure means sending money back overseas to pay for it, with interest, for decades to come. If we had more of our own savings we could invest with that money instead and the profits would go back to Kiwis.

The NZ Superannuation Fund established by the late Sir Michael Cullen now has $81.7 billion stashed away to help offset the cost of superannuation.

The $127b Kiwis have in KiwiSaver sounds like a decent chunk of change, until you consider the $4.1 trillion the Aussies have in their Super savings. That kind of money helps a country own its own future.

We need to look at boosting the contribution rates for KiwiSaver, especially on the employer side.

The current 3% employee/3% employer contribution rates were actually cut back during the global financial crisis – they were meant to be 4%/4% from 2011 onwards. In Australia, the employer alone contributes 11.5% and employees get tax breaks on their contributions.

We’ve got to get more people into KiwiSaver from a young age and make it fairer. I’m not sure about making it compulsory but it’s worth considering, as as is bringing back the kickstart sign-up payment for kids.

We should also fix the government contribution. Right now, it’s $521 a year for those who can afford to put in $1042 or more a year - and less or nothing for those who can’t. It should be the other way around – say $2000 for starters but abating away for people with higher incomes who don’t need the help.

Barry Ebert, who’s been involved in superannuation policy for decades, promotes structuring KiwiSaver as an annuity - a government-guaranteed private pension through approved providers. A safe option for a regular, tax-free income on top of their pension, ultimately boosting living standards in retirement. Adding a life insurance component would further protect whānau.

However we improve KiwiSaver, it has to be sustainable, and that means both major political parties have to get on board. No more chopping and changing.

By supercharging KiwiSaver we can create a more equitable and secure financial future for all whānau in Aotearoa. Let’s prioritise the well-being of our whānau and foster a savings culture that benefits everyone.