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Providers split over election promises

A Good Returns survey of KiwiSaver providers shows they are split over the promises political parties have made to savings issues - with one exception.

Tuesday, November 22nd 2011, 6:21AM

by Niko Kloeten

The election campaign has exposed strong divisions between KiwiSaver providers over the best policies for the scheme and for savings policy overall.

Good Returns surveyed providers about KiwiSaver policies, as well as whether the retirement age should be raised, whether the government should re-start contributions to the New Zealand Superannuation Fund and whether there should be a capital gains tax.

A number of providers refused to participate in the survey but those that did unanimously supported raising the retirement age, a move Prime Minister John Key has ruled out but Labour has put on the table.

But Labour's policy to raise the age to 67 by 2033 is too timid for some providers, with one saying it should eventually be raised to 70 and indexed to life expectancy to provide for an average 18% of people's lives.

The survey also found strong opposition to the Greens' proposal to have a "public option" default fund managed by the Guardians of the New Zealand Superannuation Fund.

Only one provider who participated in the survey was in favour of the idea, although there was stronger support for having a single default fund of some kind to replace the current system.

However, there are divergent views on all the other topics in the survey.

A controversial question was whether KiwiSaver should be made compulsory, a policy Labour has committed to while National has only gone as planning to introduce auto-enrolment.

All but one of the responses opposed compulsion; these providers said that auto-enrolment would be preferable.

Among those opposed to making KiwiSaver compulsory, a common concern was about how people on low wages would be able to afford being in the scheme.

Good Returns also asked whether the employer contribution to KiwiSaver should be raised (Labour plans to gradually increase it to 7% but drop employee contributions back to 2%).

There were mixed views on this, with support for it being raised somewhat although not all thought it should go as high as 7%.

One provider said the employer contribution was a tax and should be treated as such, while another said employees should accept it would come at the expense of wage growth, not in addition to.

The most controversial topic was whether to re-start government contributions to the New Zealand Superannuation Fund, with half in support and half opposed.

Providers surveyed mostly opposed Labour's plan for a Capital Gains Tax, with particular concern about the proposed exemption for the family home.

"Exempting the family home will just increase the likelihood of people putting more into their own residence rather than productive investment," one provider said.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

« News Round Up: Nov 21KiwiSaver mismatch a 'huge challenge' for advisers »

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