Sam Stubbs: KiwiSavers need stability of cross party agreement

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Opinion

Changes to KiwiSaver announced in the Budget came with an assurance they would make the scheme more sustainable in the long run.

Even if the changes have this promised effect, there is a real risk that continually tinkering with the scheme will undermine the confidence people need for long-term retirement planning.

New Zealanders could become suspicious every Budget will be another opportunity for the government of the day to alter KiwiSaver's rules according to the short-term needs of its own agenda.

The current Government's agenda is clear enough: slash debt, cut spending and raise revenue.

Halving the member tax credits, taxing all employer contributions and increasing the minimum employee and employer contributions from 2per cent to 3 per cent fit the bill.

By the time the KiwiSaver kitty hits $25 billion in 2015 and $60 billion in 2021, income taxes collected from contributions plus taxes on KiwiSaver accounts will be nice little earners for the government's coffers.

Increasing the minimum contribution signals a gradual shift in funding the burden of retirement living costs away from the state and on to the workplace. But the absence of a plan for progressive increases across all contribution rates in future years is disappointing.

From 2013, employee contribution rate options of 3 per cent, 4 per cent and 8 per cent - topped up by the employer's compulsory 3 per cent - will apply.

Will these partially revised taxable contribution rates sum up to enough saving for many Kiwis to live comfortably in retirement?

Perhaps the tinkering the Government should be doing with KiwiSaver is laying out where contribution rates need to trend after 2013 so that workers can have confidence they will be saving adequately.

Australia's compulsory workplace savings scheme has a Superannuation Guarantee Rate contribution set at 9 per cent, which will increase to 12 per cent in increments between 2013 and 2020.

The Australian Government calculates the 12 per cent rate will add an extra A$108,000 ($141,000) to the retirement nest egg of a 30-year-old worker earning the average full-time wage.

Australians earn more on average than New Zealanders, so can save up more for their retirement nest eggs.

Simply increasing legislated percentage contributions to KiwiSaver won't do the trick without also putting in place policies to grow our income levels and job opportunities.

We should have a non-partisan KiwiSaver Accord between our political parties, just as we had a Superannuation Accord in place from 1993 to 2000.

The Superannuation Accord agreed on some basic, hard-wired features of New Zealand Superannuation to ensure its long-term stability.

A similar agreement on KiwiSaver could be used to signal clearly to people how to plan reliably for retirement and instil confidence in the scheme, rather than the current situation where changes can appear expedient, unilateral and disruptive.

sam.stubbs@tower.co.nz