Key would scrap KiwiSaver

Finance spokesman John Key has been sceptical about KiwiSaver in the past but has until now stopped short of outright rejection. Not any more.

Key told an ASFONZ-organised conference yesterday that KiwiSaver won’t work; that it will have to be replaced by some other scheme to encourage savings. However any such scheme is unlikely until National’s second term of office.

“The only people I can see KiwiSaver being attractive to are single people saving for their first home. As soon as they qualify for the mortgage subsidy in KiwiSaver they sign up to a mortgage. They are not going to keep saving with KiwiSaver- they would have to earn a 13-14% gross annual return to match paying off the mortgage, and that’s not going to happen.”

He also noted that most existing schemes will not comply with the KiwiSaver regime and will have to face massive administrative changes if they choose to change.

“That includes the government’s own State Sector Retirement Savings Scheme.”

There won't be any other changes to the existing state pension, he says, but there is a need for wider understanding about the implications of the aging population.

“The real crisis New Zealanders are facing - and that they don’t understand – is that they are going to live a lot longer. They will have to rely on much more private capital.”

“New Zealand Superannuation is a good system which works. The challenge for us is to bolt something onto it.”

On savings and tax, Key says National would drop Labour’s plans to abolish the tax favoured status for the seven grey list countries which include Australia, the United States and the United Kingdom. Key says abolition means setting up a new capital gains tax on investments from those countries.

“Why would you set up a capital gains tax as a barrier to Australia?” he asks

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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