Inside Money: Grand exits - why the kids will miss kickstart

There are no more $1000 kickstarters for new KiwiSavers. Photo / NZ Herald

A thousand dollars isn't what it used to be.

Assuming inflation has averaged about 2.5 per cent since the launch of KiwiSaver, $1,000 today could buy about the same amount of stuff as $820 eight years ago.

Even if the many thousands of dormant KiwiSaver accounts kick-started in 2007 with a grand upfront had maintained their nominal value (of which there is no guarantee), they would've seen a real decline in buying power.

But this doesn't mean the kickstart failed these dormant KiwiSaver account-holders, many of whom are the under-18s who don't qualify for the annual $521 government top-up.

When they eventually do come-of-age (or get a job anyway), the locked-in KiwiSaver kids have one less difficult decision to make about their futures.

In retrospect, the kickstart has been a reasonably-priced way for the government drive the savings habits of a generation in a different direction: it's actually a reducing real budget cost over time (assuming this zero inflation doesn't last forever) - as is the annual member tax credit, currently fixed at $521ish.

Nonetheless, Bill English couldn't resist killing kickstart in the recent budget: it was just lying there looking vulnerable in the government balance sheets.

English reckons his subsidy murder would save the government more than $500 million over the next four years - without damaging KiwiSaver's good name in the community.

"Auto-enrolment when starting a new job, the 3 per cent employer contribution and the member tax credit of up to $521 each year means people still have an incentive to sign-up to KiwiSaver and to keep saving for their retirement," he said via press release.

The KiwiSaver industry has begrudgingly accepted the inevitability of a kickstart-less world - hoping the carrot-withdrawal is quickly followed by a promised 'soft compulsion' stick.

In the interim KiwiSaver membership growth rates - currently ticking over at about 13,000 new members each month - will quickly drop away without the kickstart lure.

But maybe it wasn't supposed to be so easy: a grand don't come for free after all.