Debate flares over KiwiSaver scheme

COMPULSORY: Labour announced last week it would make KiwiSaver compulsory for employees.PHOTO/APN

Making KiwiSaver compulsory would be financially crippling for fledgling Hawke's Bay businesses, a local business leader warns.

Labour announced last week it would raise the age of eligibility for New Zealand Superannuation to 67, make KiwiSaver compulsory for employees and increase the contribution rate if voted into power.

Deputy Labour leader David Parker said newly-released Census data backed the decision - with the number of people in the 50 to 59 age bracket jumping by 22 per cent since 2006 to 989,000.

"Although the total population increased, fewer people are under 15 than in 2006 and this reinforces the need to address superannuation."

Paying for superannuation cost more than all benefits combined and within two years he expected it to exceed the annual spend on education.

Hawke's Bay Chamber of Commerce chief executive Wayne Walford said making KiwiSaver compulsory would be "crippling" for some businesses, which would struggle with the extra costs of employer contributions to the state-run savings scheme.

It could also prevent some taking on new staff.

"It depends where they are in their lifecycle. A lot of the businesses here, looking at the wage rates, they're not high-power businesses so we've got to be careful about the message we send.

"It's interesting that Labour talks about protecting the vulnerable and in actual fact it would make it harder for people wanting to set up business or people who are in business and were just getting by ... it may actually limit the ability for people to employ more staff."

However, raising the superannuation age to 67 wasn't likely to have much of an impact, he said.

"Businesses these days are employing people who have got experience so if there are people that are smart and are still active at 70, they're still being employed."

Labour has proposed raising the NZ super eligibility age from 2020, increasing it two months at a time to reach 67 by 2026.

The party would also make KiwiSaver compulsory for those in employment. It would be optional for the self-employed and those without an income.

The National-led Government put off automatically enrolling all employees in KiwiSaver because of the cost.

Labour would also look to change the default setting from the minimum contribution to an age-appropriate one - a decision which the Government recently decided against.

Business New Zealand chief executive Phil O'Reilly backed raising the super eligibility age to 67 and said it was unfortunate the issue had become a political debate.

"I don't hear many voices at all who don't agree with raising the minimum age for superannuation."

However, making KiwiSaver compulsory wasn't necessary, Mr O'Reilly said.

"For some workers that's likely to be negative. It might be that you're saving at the wrong time of your career. If you're on a minimum wage, it's probably a good idea to spend that money."

Caution was needed when making anything compulsory, especially when there wasn't a good reason. "A lot of the evidence around this tends to be that apparently KiwiSaver will improve net savings amongst New Zealanders. Well there's no evidence of that."

He also cited the 'incredibly expensive" cost of KiwiSaver to taxpayers. APNZ