FSC: KiwiSaver delivering for middle NZ
A decision to remove the $1000 incentive for new KiwiSaver members was made on the basis of inaccurate information, the Financial Services Council says.
Thursday, August 27th 2015, 6:00AM
by Susan Edmunds
This year's Budget axed the kickstart, on the basis of a Treasury report that said the scheme offered the Government little value for money.
In response, the FSC has commissioned its own report from the NZIER.
Chief executive Peter Neilson said the Government should not have made the decision to remove the $1000 incentive on the basis of the Treasury report.
He said KiwiSaver had been shown to be effective in getting middle-income New Zealanders saving, and diversifying their investments.
He said the NZIER report focused on the people KiwiSaver was designed for – those who were likely to have a lower standard of income in retirement than they had when they were working.
The report found KiwiSaver was likely to lead to an increase in net worth and standard of living for those people.
NZIER’s report said KiwiSaver should also lead to more diversified investment portfolios in New Zealand, reducing the concentration risk of having much of New Zealanders’ money tied up in housing.
NZIER principal economist Aaron Drew said: “If there is a really bad economic shock which compromises the ability of a future government to pay for New Zealand Super, KiwiSaver is one of the key things that is potentially there to mitigate that risk.”
Neilson said the NZIER report found the evidence for Treasury’s argument was too narrow because it used data only from the global financial crisis years.
He said it did not consider that KiwiSaver attracted young and low-income people who would not usually have been involved in formal savings schemes.
“The analysis simply compared the results for the people in KiwiSaver with those who were not, as opposed to those in the target audience who joined KiwiSaver compared with those in the target audience who did not,” Neilson said.
“We need to compare apples with apples. People on a benefit can’t afford to save and are likely to receive a higher income from New Zealand superannuation than they received during their adult lives on a benefit anyway. At the other end of the scale, people who were saving for retirement by investing in rental property or a farm would be unlikely to use KiwiSaver other than to just pick up the KiwiSaver incentives. For this group KiwiSaver would probably not increase their savings, it would only change the composition of their savings. Neither of these categories were in the target group for KiwiSaver and should not have been used for comparison.”
| « Retirement planning has to start somewhere: FMA | FMA urges KiwiSaver check-up » |
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