tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Wednesday, May 25th, 11:45AM

Investments

rss
Latest Headlines

KiwiSaver incentives 'don't help those who need it most'

Concerns about KiwiSaver creating inequity in the retired population would be better tackled by abolishing the scheme entirely than introducing new tax incentives to get people saving more, the working group considering the future of tax policy has been told.

Friday, June 8th 2018, 6:00AM 1 Comment

by Susan Edmunds

The Tax Working Group recently took submissions from the public on New Zealand’s tax system. Rob Dowler, former head of the Securities Industry Association and now an independent industry consultant, provided his submission to Good Returns ahead of the official release of submissions, likely in October.

A number of submissions are understood to have suggested changes to the way long-term savings, in particular KiwiSaver, are taxed.

Former Revenue Minister and former FSC boss Peter Neilson released his, which said his government got it wrong when it axed incentives for superannuation saving schemes. He said earnings within KiwiSaver should be tax-exempt to boost returns.
Dowler said such changes only served fund managers and savers who could afford to save and were doing so anyway.

He pointed to reported comments by the group’s chair, Sir Michael Cullen, in which he said the scheme should be mandatory, to tackle the problem of growing inequity between those people who had saved in their KiwiSaver accounts over their working lives and those who had not.

Dowler said some people were not contributing to KiwiSaver because they could not afford to. To mandate them to do so would come at the expense of their ability to meet their basic living requirements.

“If compulsion is introduced, to ensure that the living standards of this final group are not adversely impacted, government has no choice but to either enhance the income of this latter group to cover the contributions required to be made to KiwiSaver, or alternatively for the government to make some or all of the payments direct to KiwiSaver that such individuals would otherwise be required to make.

“It is at this point that one can ask, in the face of a universal NZ Superannuation payment and minimal poverty reported amongst the aged population, what the point of KiwiSaver is?

“It only has a point if it is believed that NZ Superannuation is insufficient in itself to provide an adequate retirement income, or if there is an as yet unstated intent to replace NZ Superannuation with KiwiSaver or make NZ Superannuation means-tested again.”

He said inequity could better be reduced by abolishing KiwiSaver and allowing voluntary savings for those who wanted it, with support from the pension.

“Retirement saving is simply about having enough money when one wants to retire to enjoy the lifestyle that one aspires to at that time. It does not need to be in a specialised ‘retirement’ fund. Providing incentives, introducing compulsion and locking money away until a specified age simply introduces unnecessary distortion, increases inequity, and reduces personal financial flexibility.

“Even without compulsion, KiwiSaver does all of this, with the restrictions on financial flexibility specifically recognised in the circumstances allowing withdrawal of funds in the case of hardship and buying a first home. KiwiSaver fails to recognise the other costs that the lack of flexibility within the scheme imposes.”

Tags: KiwiSaver

« The employer’s conundrumAdvisers welcome more detailed projections »

Special Offers

Comments from our readers

On 8 June 2018 at 8:15 am Michael Chamberlain said:
Agreed, if the objective is to improve retirement security for the individual then compulsion does not work (unless it is an unfunded universal benefit like NZ Super) and tax incentives do not work. Compulsion and tax incentives work well if the objective is to build a funds management industry but then not if you want it to be efficient. There are few things that governments can do and so government policy should be focused on those. gathering data, reducing barriers and creating an environment for economic growth are the key iniatives.

Sign In to add your comment

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
Subscribe Now

News and information about KiwiSaver

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans 6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 4.29 5.09 5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - 4.19 - -
The Co-operative Bank - Owner Occ 5.45 4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 4.79 5.69 5.95
TSB Bank 5.59 5.14 ▼5.79 6.15
TSB Special 4.79 4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com