25 May 2015

Forget that $1000 Kiwisaver kickstart

10:50 am on 25 May 2015
The Government has canned the $1000 KiwiSaver kickstart programme.

The Government has canned the $1000 KiwiSaver kickstart programme. Photo: 123RF

The Government is being accused of stealing from future generations by scrapping the $1000 KiwiSaver kickstart payment.

Legislation cancelling the payment was one of a number of budget-related bills passed as Parliament sat under urgency over the weekend.

The Government said halting the kickstart payment would save it about $500 million over the next four years.

But during the debate over the weekend, Labour's David Clark said that National had hit the panic button because it failed to reach surplus.

“It is stealing from future generations through this measure, by taking the thousand dollar kickstart programme out of action.

“It said that it will increase benefits in this budget, but it's giving with one hand, and taking from another."

ACT Party leader David Seymour said that the real elephant in the room was the looming cost of superannuation.

“They're more than happy to take away from younger New Zealanders, those who might have been enrolling for KiwiSaver in the future, but they will not bite the bullet when it comes to the future liabilities for NZ Super that those same young people will now have to pay.”

New Zealand's first pension scheme was introduced in 1898 for 'persons of good character' older than 65. It was means tested and income tested - but the take-up rate was low, probably because life expectancy was even lower.

The old-age pension evolved, and in 1977 Robert Muldoon's National government established the universal super for 60-year-olds, which was paid at 80 percent of the average wage for a married couple.

Now, the payment is at 66 percent, and the age of eligibility is 65, which is where the Prime Minister John Key, along with the Labour party leader Andrew Little, has pledged it will stay.

Sascha Zerjal and Sam Dickinson.

Sascha Zerjal and Sam Dickinson. Photo: Michael Cropp/RNZ

Sascha Zerjal, a 6th year law and commerce student reckons universal superannunation will be gone by the time she at retirement age.

"We'll have KiwiSaver, I imagine they'll have gotten rid of superannuation by then. Or at least cut it back so much that it's not worth it, or have really strict criteria for it."

She believed she would have to save for her own retirement, so cutting the $1000 kickstart would do little to deter young people from joining KiwiSaver.

"I think people will still sign up, they're just being slightly more ripped off; but yeah, they'll still sign up."

Her classmate Sam Dickinson said people would continue to sign up because of the contributions from their employers.

"The amount of money you're going to get from that $1,000, the actual real value of that in 40 years by the time we [retire] actually isn't going to be that much".

Even Lydia Steel, who had not signed up when the boost was available was not too bothered.

Financial columnist Mary Holm said the outlook for Super was not all that gloomy.

But she said that to be comfortable in retirement, forward planning was essential - and KiwiSaver was a great way to do that.

"It's actually almost impossible to beat it. If you don't go into KiwiSaver, and you're trying to do just as well with rental property or direct investment in shares or something like that, it's very unlikely you'll get the same level of return for the same level of risk," she said.

And with the kickstart gone, the retirement commissioner Diane Maxwell said the door was now open "to an earlier date for auto-enrolment, which would be a positive move".

A version of this story was first published on radionz.co.nz