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Bayly, fund managers on KiwiSaver for tenancy bonds

National Party finance spokesperson Andrew Bayly, says he doesn’t know if KiwiSaver providers were consulted about the party’s new KiwiSaver policy as the initiative was led by Chris Bishop.

Tuesday, July 18th 2023, 8:09AM 2 Comments

by Andrea Malcolm

The National election promise will allow under-30-year-olds to use KiwiSaver for tenancy bonds.

Housing spokesperson Bishop announced the intention to students at Auckland University. Under it students would be able to transfer money from their KiwiSaver to Tenancy Services and return it to their savings when the tenancy ended. They would also be able to transfer the bond to a new tenancy. There is a five year cap.

“The demand came from younger people, and particularly our young Nationals who said that for a lot of people, coming up with a bond is really difficult. And so it was a demand driven policy,” says Bayly.

He says National was concerned that people don’t withdraw money and not return it to KiwiSaver.

“That's why we're going to take that discretion out of the hands of the individual wanting to access it. The money goes straight to the Tenancy Tribunal and gets paid straight back into the KiwiSaver. No doubt it will have some administration costs for KiwiSaver providers, but they're used to withdrawing money out of KiwiSaver. It's not something that they’re not used to doing.”

Asked if he thinks the policy erodes the original purpose of KiwiSaver as a retirement scheme, he says that would be the case if the money was not paid back. On losing interest that would have accrued while the money is used for a tenancy bond, he says it would only be for brief amounts of time.

Kernel Wealth Management CEO Dean Anderson says he wasn’t aware of providers being asked about the policy.

He says while he hasn’t seen the full details to make a fully formed judgment, continual changes to non-critical KiwiSaver settings risk undermining the confidence in the scheme as a whole.

“It makes people question what rules changes may come next, therefore they distrust it - it only takes two minutes reading social media comments to see this.

Sharesies CEO Leighton Roberts acknowledges the difficulty of scraping together a tenancy bond.

“Rent bonds are definitely an affordability problem - but the proposed policy to let under-30s access their KiwiSaver for tenancy bonds isn’t the right solution for New Zealanders.

“KiwiSaver is a scheme to help people save for their future and by relaxing how to access this money will inevitably lead to a lower balance for retirement or buying a house.

“It’s important to note that paying for tenancy bonds isn’t ring fenced to just those under 30s, it’s impacting Kiwis of all ages.”

Simplicity CEO Sam Stubbs says it's a political decision and he doesn’t have a view whether it’s a good or bad idea.

“Clearly the youth wing of the party has said it is and the party is accommodating it. I’ll leave it up to the politicians to decide whether it would be sufficiently attractive to enough people.

“There are people who will say it’s a slippery slope. KiwiSaver was designed as a retirement account. The more it becomes like a general saver account, the more it is deviating from its original purpose. But people shouldn’t confuse it with policies that take money out forever. It’s temporary so it’s more like a savings suspension.”

Financial Services Council (FSC) CEO Richard Klipin strongly reiterates that KiwiSaver is designed to be a long term retirement and savings tool for Kiwis.

“We want to ensure the thinking of this policy has considered the impact of reducing the KiwiSaver balances of young New Zealanders and therefore the flow on effect on the long term earnings of their KiwiSaver accounts.

“Even small changes to policy settings can have considerable effects on KiwiSaver earnings over the term of investment.

“We want to ensure this policy and any other KiwiSaver policy initiatives from all political parties heading into this year’s election are well designed and focus on the long term investment horizon for Kiwis preparing for their retirement.

“We are calling for a full review of KiwiSaver to ensure policy settings go to the heart of its core purpose to prepare Kiwis for a dignified retirement. That will mean setting a long term strategic policy direction for KiwiSaver.

“The future of KiwiSaver is vital to the future of working Kiwis and their families. We need all political parties to understand that certainty with the policy settings will mean more certainty for New Zealanders. The election is an opportunity for all political parties to restate their long term commitment and support for KiwiSaver.

Kernel’s Anderson says he would like to know when politicians will start discussing policy settings that drive engagement and contributions into KiwiSaver.

“We need to be talking about increasing contributions and getting the policy settings in place that leverages the now $100b of capital into driving better outcomes for New Zealand and all Kiwis - not building a mindset of KiwiSaver being a transactions account.”

Bayly says KiwiSaver in general needs to be “looked at”.

“We've got to look at KiwiSaver in general, because the average balance in KiwiSaver is about $28,000. And that means many New Zealanders are not saving sufficiently for retirement. And if you look at the current estimates, it used to say that [for retirement] we needed anywhere between $400 to $800,000. Since then, we've had massive inflation and now it’s more between $500,000 and $1 million.”

“For a lot of its education and encouraging people to do it. A lot of people don't pay KiwiSaver for different reasons and we need to make sure that many people are taking advantage of KiwiSaver.”

Tags: KiwiSaver

« KiwiSaver gender gap widens further, average balances dropStartup experts asks govt to ease KiwiSaver private equity rules »

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Comments from our readers

On 18 July 2023 at 10:21 am Pragmatic said:
Several salient points arise from this announcement:

1. Under the guise of 'never ask the fox to guard the henhouse', I'm curious why the KiwiSaver asset management community believed that they should be consulted prior to National releasing this policy.
2. There is a largely undiscussed argument (Chamberlain M. & Littlewood M.) that suggests that it is timely to review KiwiSaver, noting the low levels of contribution, its use for housing, too many in default schemes, low default contribution rates, level of fees and competition, gender issues, and the lack of longevity protection and annuitization options.
3. Conversely, the OECD recognizes that the forces of demography and under-funding for retirement requires governments to consider how this will be addressed going forward.

All of this reinforces Richard Klipin's statement that it is timely to review the objectives and outcomes of KiwiSaver before further policy / political tinkering is embarked upon.
On 18 July 2023 at 10:51 am w k said:
kiwisaver for tenancy bond??? that's the exact reason why i strongly advocate minister (i note bishop is not a minister) taking respective portfolios should have vast experience in those areas.
bishop obviously can't differentiate savings and bond. what happens if the bond was forfeited?

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