Main parties eye compulsory KiwiSaver

Photo / The Aucklander

The Labour Party has indicated support for making KiwiSaver compulsory, while the Government is reportedly setting up an independent working group to investigate the same issue.

As both major parties criticise the lack of savings in New Zealand and increasing overseas debt, the debate on compulsory superannuation is looking increasingly likely to play a major role in the lead-up to next year's Budget.

The working group, similar to last year's Tax Working Group, will review retirement savings and look at how to boost savings and reduce overseas borrowing.

The Cullen superannuation fund, KiwiSaver and tax breaks for savings will all be looked at.

Prime Minister John Key this morning said it was too early to say whether the Government would support compulsory retirement savings.

Mr Key said he was happy with how New Zealand's superannuation scheme worked and it was, essentially, compulsory.

"That's a very elegant system, it works well, and we're not going to change it - either age of entitlement or the amount that you get," he told TV One's Breakfast show.

However, 90 per cent of New Zealand's debt was owned offshore, he said.

"Lifting our national savings rate would be really good, the question is how you do that."

Finance Minister Bill English declined to comment yesterday, but last week he stressed the growing debt problem in a speech to the NZ Council for Infrastructure Development.

"In 2000, our debt to the world was just over $100 billion. It's now approaching $180 billion and by 2014 it is forecast to be nearly $250 billion. So we have a big task to turn this economy around and rebalance it towards savings and growth."

Labour leader Phil Goff said yesterday that KiwiSaver - which workers can opt out of - had been a great success, but had had little impact on overall net savings.

"We absolutely have to increase our savings as a country. If we want to own our own future we've got to have the money to invest," he told TV3's The Nation.

"We're looking to have a universal KiwiSaver programme. Now how we do that, the details of how we do that we're still working through."

PricewaterhouseCoopers tax expert John Shewan is reportedly part of the working group, and though he has not confirmed this, he has said making KiwiSaver compulsory would be considered. Nearly half the working-age population has already signed up.

Other areas for study would include incentives to save, such as tax deductions for contributions, a lower tax rate, or taking inflation into account.

Labour's finance spokesman David Cunliffe said the working group showed that National did not have a plan for retirement savings.

"Outsourcing the problem to a savings working group is tantamount to an admission that any effects from tax changes have been minimal, and National has nowhere else to go."

Treasury Secretary John Whitehead said in May that although the Treasury had not supported compulsory superannuation in the past, it was an important debate to be had.

A spokeswoman for the Retirement Commission said the agency was looking at retirement income policy as part of its three-yearly policy review expected to be finished by December.

- With NZPA