KiwiSaver

The number of New Zealanders signed up for KiwiSaver at the end of the scheme’s first six months is far more than was expected for its first year, announced Finance Minister Michael Cullen and Revenue Minister Peter Dunne.
Press Release

As at 31 December, 381,000 New Zealanders were actively saving for their retirement through KiwiSaver. That compares to an initial forecast of 276,000 by 1 July 2008.

“The verdict on KiwiSaver is in,” Cullen said. “New Zealanders want to save for a better retirement and they know KiwiSaver makes that easier than ever before.

“New Zealand has a savings problem. We were recently ranked 108 out of 131 countries for our national savings rate. If that poor performance were to continue the consequences for our economy and for our living standards in retirement would be significant.

“KiwiSaver will address imbalances in the economy, create a domestic pool of capital to help local business expand and succeed, and will lift living standards in retirement.”

“One of the things that is particularly exciting is the continued popularity of KiwiSaver among younger New Zealanders,” Peter Dunne said. “Over 55% of KiwiSavers are under 45 years old and over 20% are younger than 25 years old.

“Starting the savings habit early will mean that these young people will be able to generate very significant savings by the time they retire and in some cases will be able to use their savings to buy a first home.”

Crown payments to KiwiSaver scheme providers in December totalled $104 million. Overall more than $300 million has now been transferred since the scheme’s launch on 1 July 2007.

The Retirement Commissioner’s suggestion of lifting the age New Zealand Superannuation kicks in has been greeted with a resounding raspberry by both main political parties.”No way,” was how Finance Minister Michael Cullen responded to a question about it from Good Returns at a briefing on the government’s Half Yearly Economic and Fiscal Update.

Cullen said there had been “enormous political disturbance over the course of 30 years” because of different parties changing the rules around superannuation and he had no intention of revisiting the issue.

It was one of the reasons there had been such a strong vote by older New Zealanders for MMP in 1993, he said, “and arguably the economy has paid a reasonably heavy price for that piece of fiddling around. We are not going to go there again.”

National’s finance spokesman Bill English is similarly negative.

“We’ve got no interest in changing superannuation,” he says.
Retirement Commissioner Diana Crossan’s three-yearly review of retirement policy said that, with people living longer, the pension age of 65 could be raised to 67.

“People are living longer and there are more of them,” Crossan argues. “So the question has to be, how do we finance that?”

The report was also critical of some aspects of KiwiSaver, saying it favours those on higher incomes.

The incentives to join KiwiSaver are “generous”, the report argues, and calculates that in 10 years time, will be costing the government’

$2 billion a year, partly in the form of the $20 a week top up and partly through employer tax credits.

English says National is looking at changes to KiwiSaver, but would not elaborate further.

The number of people joining KiwiSaver continues to defy initial expectations with over 316,000 New Zealanders signing up in just the first five months, Finance Minister Michael Cullen and Revenue Minister Peter Dunne said today.As at 30 November, 316,865 New Zealanders were actively saving for their retirement through KiwiSaver. This news comes just a month after KiwiSaver numbers reached the quarter million mark.

“New Zealanders are embracing KiwiSaver in huge numbers,” the Ministers said. “They know that KiwiSaver makes saving for retirement easier than ever before.

“One of the most encouraging signs is the large numbers of younger New Zealanders who are joining the scheme.

“Nearly 20% of KiwiSavers are younger than 25 and over 33,000 KiwiSavers are less than 20 years old. This is great news as these young New Zealanders are taking up the savings challenge early and will be able to build a substantial nest egg for retirement or in some cases for their first home.

“It’s also encouraging that over half of KiwiSavers are aged under 45.

“While not all political parties have backed KiwiSaver, New Zealanders are showing that they know our savings problem is real and they know that KiwiSaver makes it easy to save.

“It is also important to note that KiwiSaver will build up a substantial pool of domestic capital available for local firms to draw from for investment.

“The large pool of savings built up as a result of superannuation schemes in Australia has been sighted by some commentators as the single most important factor behind the growing wealth across the Tasman.”

New Zealand’s efforts to be economically strong should include increased capital investment by manufacturing and other firms, Deputy Prime Minister Michael Cullen says. The service and manufacturing sector in particular needed to change to help drive New Zealanders’ incomes towards those in Australia, Cullen told The Press after the 20/20 Primary Industries Summit in Christchurch yesterday.

“The big difference between the Australian economy and ours is the intensity of capital investment in their economy.

“That means a lot of things: certainly improving capital markets (with) things like KiwiSaver; and improving the human capital — things like changes around the company tax rate and depreciation are all about encouraging investment,” Cullen said.

Business also had to recognise that increased capital investment was needed for long term development. “We’re running out of capacity to drive simply growth by working people harder and adding more workers. This has what has driven this economy too much for the last 15 years.”

New Zealand had to continue to focus on skilled migrants, and the Government would eventually like to see the migration statistics to grow back to an annual intake of 10,000 people flowing into New Zealand, Cullen said.

He was not concerned by the continuing drift of Kiwis across the Tasman.

For a long time New Zealand’s overall long-term trend inflow had been assumed at around a 5000 net inflow each year, but that would gradually increase towards 10,000 annually in the next couple of years.

“More recently we’ve have upped that and I would expect to see that grow again — not necessarily in the next year or so, but over the cycle.

“We need to continue to concentrate on that for the long- term future because that’s really the nature of our economy.”

Cullen said New Zealand’s primary industries could provide leadership in terms of showing efficiencies and sustainable practice to the nation. Today’s wave of globalisation was both faster — with tariff barriers falling and corporates expanding global operations — and deeper, than before.

With world economies coming closer to each other than ever before the successes and failures of nations were becoming increasingly collective.

For example rogue events such as the spreading North American subprime mortgage market problems could easily spread as far as our shores.

New Zealand had to seize global opportunities while maintaining “vital insulation” from global shocks.

Primary industries had the global scale, sophistication and competitive advantage to lead a continuing economic transformation to build prosperity for New Zealanders.