By Alex Tarrant
The KiwiSaver industry is well placed to deal with costs arising from the changes government has already made, and will make to KiwiSaver in its May 19 Budget, Prime Minister John Key says.
In his weekly post-cabinet press conference in Wellington on Monday afternoon, Key said more clues to the proposed changes to the scheme would become clearer in a speech he will give on Wednesday, and that he did not believe the changes would break any election promises National made about the scheme.
Industry groups have expressed concern over the costs changes to the scheme impose on providers, and that government might cut the Member Tax Credit or Housing New Zealand first home deposit subsidy incentives for the scheme.
Key defended changes already made to the scheme, saying there were not “constant changes,” in response to industry concerns over how much changes cost KiwiSaver providers.
“These are schemes where there are 1.65 million New Zealanders in the scheme, 20,000 people a week join KiwiSaver, it’s got tens of billions of dollars in the scheme over time, and so in my view the industry is well placed, actually, to cope with these issues because the gains are very significant for them,” Key said.
Before or after election?
Asked whether changes to KiwSaver would be in place before the November 26 election and therefore break an election promise, Key said: “You’ll have to wait and see when we discuss that on Wednesday, we’ll be making small comments there. But no, I don’t believe that they will be a broken promise.”
Asked whether changes would therefore take place after the election, Key replied: “You’ll have to wait and see, but I don’t believe they constitute a broken promise”.
Speech on Wednesday
Key would deliver a speech on Wednesday that could outline some of the changes that might be made, he said.
“We’re just taking this opportunity to spell out some of the challenges that the country faces, why it is we think a zero or balanced budget makes sense, and to give some greater clarity around some of the changes we might make,” Key said.
“We hope we’ll be able to give you some more guidance around changes we’re making to KiwiSaver and Working for Families, and as a government we’ve been very conscious that we need those schemes both to be there for New Zealanders, to be affordable and to be sustainable,” he said.
“What we are doing in Budget 2011, in my view, is putting those schemes, as well as interest free student loans, on a long-term sustainable footing.”
Big schemes
“They’re very big schemes, they cost a lot of money, they’re there to lift national savings, and in some areas where the government is borrowing for savings, that’s not lifting national savings,” Key said.
“But look, the view that we have taken as a government is that these were big schemes put in place in different economic conditions by the previous Labour government,” he said.
“We’re all aware about how those conditions have changed, but we also recognise how New Zealanders value interest-free student loans, Kiwisaver and Working for Families.
“What we want to do is make sure that they are there for the long haul, in a form that’s affordable, recognising that there are fluctuations in whether the government is in surplus or in deficit.”
'People will understand'
Key said he was confident that by the time people saw the changes to KiwiSaver they would understand the rationale for it, and feel comfortable as a KiwiSaver participant.
He did not think people would want to opt out of the scheme, given their contract with the government could be considered broken due to changes made to incentives for the scheme.
Meanwhile, government had tried as best as it could in tough economic conditions to take on board the recommendations made by the Savings Working Group, Key said.
“I’m not arguing that we’re going to go and address all of their issues come the May 19 Budget, but if we’re in a position to put together a government in future years, then future budgets might be able to address more of their concerns,” Key said.
10 Comments
It's annoying that National plan to make cuts on these programmes after introducing large tax cuts, particularly for those on high incomes. These tax cuts were clearly unaffordable and were "paid" for by making life harder for those on low incomes with increased GST.
The kiwisaver and WFF subsidies are effectively tax cuts as well but are only provided to certain members of the taxpaying and non taxpaying population. All of these tax cuts are unaffordable as well and also further distort what should be a simplified tax system.
"He did not think people would want to opt out of the scheme, given their contract with the government could be considered broken due to changes made to incentives for the scheme."
Does this mean we can pull out and take all the money because the govt broke their contract??
That should be the case. In any other contract you would be able to pull out if this happened.
OH well, hopefully I can still bank $1,040 this year before the scheme changes. I will have my few grand plus the govts few grand gifts locked up for 20 years before I can get at it.
What is the bet the providers up the fees and my money dwindles away to nothing before I can get it back.
Lucky I only put the minumum in each year. I won't be adding to it if the govt credit goes.
Unless the Government says it is going to take back the money it has already put into your KiwiSaver account I cannot see that you have any basis to expect to be able to withdraw the money that you have put into it, since you did receive the subsidies and tax breaks that pertained at the time when you put the money in.
You can indeed choose not to put any more money into your KiwiSaver account if you don't like the changed terms, but as long as you save the money by some other means instead that's no skin off the Government's nose, so they won't mind.
What would be a worry as far as the public finances are concerned is if you stopped contributing to KiwiSaver and spent the money on short-term consumption instead - but then ultimately that would be your problem as well, for the money wouldn't be there for you in your old age.
Well, I told the husband not to switch to kiwisaver from our other retirement fund (which our employers subsidised already) because those government idiots would change it whenever they felt like it (remember when employers were going to contribute up to four percent on kiwisaver?), so we didn't.
We DID join though hoping they wouldn't change it just to hedge our bets. First they lowered the proposed employer contribution. Now they are saying they'll do away with or lengthen the time frame for the kickstart and take away the tax credit. If they take away the member tax credit, we'll both take a permanant holiday from kiwisaver and put our money elsewhere. Why would I keep locking my money away from myself with no benefit at all?
Oh and there is an article in the online Herald that says kiwisaver is just hitting critical mass as far as helping investment in NZ. Hah, watch that disappear as people stop contributing.
I am not sure which Herald article you refer to so cannot comment on how they work out that KiwiSaver is "helping investment in NZ".
But none of the money that Government is putting into KS is doing that, since all of that money is being borrowed, and so adding to the public debt to exactly the same extent as it is adding to private savings - net effect, zero.
Similarly, to the extent that people are saving money in KiwiSaver that they would otherwise save somewhere else, that also has a net effect of zero on total savings and investment.
So if you don't like the revised terms of KiwiSaver, by all means save your money somewhere else and stop expecting the taxpayer to bribe you to do it.
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