Few other election issues will directly affect as many New Zealanders as policies around KiwiSaver and NZ Super.
The column this week looks at the different parties' policies, as presented at two recent multi-party political debates. We'll return to Q&As next week.
Let's start with the basics. It seems clear that - whatever the outcome of the election - we're going to:
Keep NZ Super available to everyone.
Sure, there were opponents to these ideas at the debates - which were run by the Financial Services Council and the NZ Association of Credit Unions.
John Minto (Internet-Mana) didn't support KiwiSaver, saying it privatised superannuation, and could lead to "the commitment to NZ Super evaporating".
And Robin Grieve (Act) was no fan of NZ Super. "Without government involvement, everybody would save for retirement," he said. And NZ Super means taxes are higher. On KiwiSaver, said Grieve, "there's little point, and it's unfair. It creates inequality".
Others disagreed with that last statement. Paul Goldsmith (National) said research showed KiwiSaver didn't increase income inequality, and David Parker (Labour) commented that "the tax incentives are quite progressive. There's greater benefit for those on lower incomes".
That's correct. The 3 per cent contributions of a part-time employee on $20,000 are multiplied 2.33 times by employer and government contributions. By comparison, the contributions of an employee on $60,000 are doubled, and for an employee on $200,000 they are multiplied by 1.76.
Grieve had other criticisms of KiwiSaver, too. Of the target group - people who weren't saving before - only a third are saving in KiwiSaver, he said. "That leaves two-thirds who are not. And it's very expensive on taxpayers. Does it increase savings? If you pay off your mortgage over longer, maybe your savings end up less." Still, he said, getting rid of KiwiSaver and NZ Super is "nigh on impossible" now, so he proposed some lesser changes.
And his wasn't the only party wanting to fiddle with KiwiSaver. Only Hinurewa Te Hau (Maori) seemed happy with the status quo. She added that she sees KiwiSaver as "a tool to build financial literacy ... in the context of our whanau ora policy".
But KiwiSaver changes seem inevitable. And NZ Super might also be rejigged. Savers and retirees can't yet relax and assume the details are set in stone.
We're not talking about a whole new ball game, but there are likely to be some new rules for the players and the ref.
How might KiwiSaver change?
National plans to automatically enrol all employees - in the same way that new employees are currently enrolled - giving them the chance to opt out after a couple of weeks. Labour would like to make the scheme compulsory from October 2015 for everyone 18 to 65 except students, beneficiaries, the self-employed and those on very low incomes.
In response to concerns about lower-income people affording KiwiSaver, Parker said Labour would raise the minimum wage, "and that would have a knock-on effect for people on low and middle incomes". He also said newcomers to KiwiSaver would start their contributions at just 1 per cent.
Asked if compulsion might mean "juicy profits for big Australian banks", Parker replied that Labour would control the fees of KiwiSaver default options, and added that Australia has managed this problem.
New Zealand First and United Future also support compulsion. But the Greens support auto enrolment, because some people couldn't afford KiwiSaver, said David Clendon.
Act opposes compulsion. "It would require people to save at a constant rate. People would over-save when they're young and under-save when they're older," said Grieve, adding that the young are busy buying houses or paying off mortgages.
"If we have compulsion, in theory you don't need the kick-start," said Parker (Labour). "But we want to maintain public support for KiwiSaver so we would keep it." However, for people compulsorily enrolled in KiwiSaver, Labour would pay the kick-start in the form of $200 a year for five years, to spread the cost.
Act would remove the kick-start. Grieve said that when the maximum tax credit was halved, he felt the government had breached its contract with KiwiSaver members. "But we can drop the kick-start because there's no contract for that. Instead we would encourage private saving."
New Zealand First would automatically give the kick-start to every newborn baby, and "parents can use Flybuys, etc, to deposit in their children's accounts", said Winston Peters.
Starting in April 2016, Labour would gradually raise KiwiSaver contributions over six years, from the current 3 per cent each from employees and employers to 4.5 per cent each in 2021. People compulsorily enrolled would start contributing at 1 per cent from October 2015, also rising to 4.5 per cent in 2021, but they would get the same employer contributions as everyone else.
Raising contribution rates could "give an incentive for employers to employ people who aren't in KiwiSaver", said Parker. That's one reason to make KiwiSaver compulsory.
Also, from 2021, Labour proposes to give the Reserve Bank the power to set a "variable savings rate".
This means minimum KiwiSaver contribution rates could be changed, to help control inflation. If inflation was rising, contribution rates would also rise.
Act would make the minimum employee and employer contribution rates voluntary.
A state-run scheme
The Greens propose what Julie Ann Genter called a "public option" for KiwiSaver. This would be a state-run scheme, as suggested by the Savings Working Group. Fees could be considerably lower because of the large scale and there would be no need to make a profit, said Genter. The scheme could be run by the people who run the NZ Super Fund (Cullen Fund) and administered by Inland Revenue or Kiwibank.
New Zealand First has a similar idea. It would call the scheme KiwiFund and it would charge "minimal fees", said Peters.
A guarantee might mean that nobody would withdraw less than their own contributions to KiwiSaver, or perhaps all contributions. Labour says it's willing to look at this. "With compulsion we wouldn't necessarily have a capital guarantee, but we'd take care not to have people pressured to take too much risk," said Parker.
In New Zealand First's KiwiFund, members would "get back their capital and inflation", said Peters.
Act opposes a guarantee. KiwiSaver providers compete on being safer and paying the greatest return, said Grieve.
"If there was a capital guarantee, all the schemes would be safe, so they would just compete on returns. There would be too much risk."
Investing in New Zealand
United Future said a portion of KiwiSaver funds should be invested in New Zealand innovation and infrastructure. And if the Greens set up a state-run KiwiSaver fund, they would like it to be "run in the interests of the New Zealand economy", said Genter.
Similarly, New Zealand First's KiwiFund "would invest much more in New Zealand land and assets than existing KiwiSaver schemes", said Peters.
Help to buy a first home
From April 2015, National would double the first home subsidy for people buying newly built houses to a maximum of $10,000 - or $20,000 for a couple. It would also increase the maximum house prices for the subsidy to $550,000 in Auckland, $450,000 in Wellington, Christchurch and some other areas, and $350,000 elsewhere. And it would permit KiwiSavers to withdraw tax credits when buying a first home.
Michael Brunner (Conservatives) also spoke of "increased ability to divert KiwiSaver money to home ownership, but we're not fans of the new house focus".
In reply to a question about controlling KiwiSaver fees, Commerce Minister Craig Foss (National) said the number of default providers had recently increased from five to nine, "and their fees have all come down significantly". The Government has also required default providers to offer similar fees to their non-default members, he said.
He added that the KiwiSaver Fund Finder tool on www.sorted.org.nz gives people more details on fees.
How might NZ Super change?
National says it will keep the starting age at 65, but Labour plans to gradually raise it to 67, from 2020.
The Greens wouldn't change the age, said Genter. "Raising the age is overly simplistic. It would be to the detriment of certain groups, such as those in physically or mentally harmful jobs."
Act supports raising the age to 67, with that age then indexed to changes in life expectancy. However, "raising the age would be difficult for those with low life expectancy and manual workers", said Grieve. "So they should be means tested at 65 and preferably younger."
He added that he didn't think people would use trusts to help them qualify for means-tested payments because the means testing would apply for "only a couple of years".
Several other parties want to reduce the NZ Super age for some. Minto said the age shouldn't rise above 65 and we should reduce it for manual workers, "who have a lower life expectancy anyway".
Similarly, the Maori Party wants to drop the age to 60 for groups with lower life expectancies. For example, Maori men have a life expectancy of 73, compared with non-Maori of 80. And for women it's 76 compared with 84, said Te Hau. Also, many labourers can't work past 60, "and it's difficult for them to find alternative work".
Te Hau added that "many of these people have been lower income earners and live in rental housing," so they should receive payments at the full rate from age 60, but there would need to be means testing.
United Future is pushing what it calls Flexi-Super. People could choose to start at any age between 60 and 70, with lower payments the younger you start. At 60 you might receive 70 per cent of the current payments for life. At 70 you might receive 150 per cent for life.
This would be self-funded, said Adam Light (United Future), which presumably means it wouldn't cost more than the current set-up. However, Genter (Greens) rejected Flexi-Super partly on those grounds, saying that Treasury has said it may not reduce the cost of NZ Super.
Genter added that low-income people who tend to be forced to stop work earlier are also most likely to die early, so Flexi-Super wouldn't be a good deal for them.
Light acknowledged the payments would be low if you start at 60, "but at 65 KiwiSaver kicks in".
But Parker was concerned about people being on different rates of NZ Super when they are very old. If one person in a couple loses their job at 60, and they can't get the unemployment benefit because the other one is working, "they'd be tempted to take Flexi-Super early and then have a lifetime of poverty in their old age", he said.
Parker also said Flexi-Super wouldn't work because of "selection bias". This refers to the fact that people in poor health who think they won't live many years would be better off starting at 60, and those who expect to make it to 100 would be better off starting at 70. If that is allowed for, the amount paid to 60-year-olds would have to be a lot lower than what's paid to 70-year-olds.
Genter probably summed up the views of many when she commented, "Any future change to [NZ Super] eligibility should be only with broad political consensus," and it should be a long-term decision.
Payment rises over time
NZ Super is currently raised each year to reflect increases in average wages. Internet-Mana thinks it's "really important" to keep the indexation to the average wage, said Minto.
However, Act wants NZ Super indexed to the Consumer Price Index, said Grieve. This tends to rise more slowly than wages. He added that people would be better able to save for retirement because, under Act, the top tax rate would be 17.5 per cent.
Finally, a tip ... to Robin Grieve of Act: You mentioned several times that you contribute $1026 a year to KiwiSaver, to get the maximum tax credit. You're missing out on $8 of government money! The maximum credit applies if you contribute $1042.
• Mary Holm is a freelance journalist, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.
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