Winston Peters’ 1997 referendum on compulsory retirement savings was crushed by almost 92% to just over 8%.
Labour campaigned twice more on savings-based retirement schemes, in 2011 and 2014, only to suffer heavy defeats.
David Cunliffe’s proposal was similar to what National is promising today.
In contrast, Sir John Key remained sceptical of KiwiSaver, opposed compulsion and never lost an election.
So what has changed?
Voluntary KiwiSaver has become enormously popular. Around 3.4 million New Zealanders are enrolled.
KiwiSaver funds now hold more than $140 billion.
Demographics have changed too. The annual cost of New Zealand Superannuation was less than $20b in 2023. Treasury forecasts it will exceed $30b by 2030.
Recent polling has put support for compulsory KiwiSaver at around 70%.
Polling often depends on the question. Had respondents instead been asked, “Do you support making KiwiSaver compulsory and lifting contributions to 12% of income — 6% from employees and 6% from employers?” then I doubt support would still be anywhere near 70%.
Behaviour often tells us more than opinion polls.
The Financial Markets Authority reports 30% of working-age KiwiSaver members are not contributing.
Another 84,000 are on savings suspensions. Financial hardship withdrawals exceeded $400 million in the last reporting year.
Increasing contributions and making them compulsory will have a significant financial impact.
Compulsion assumes the Government knows better than we do how we should be saving. Buying a first home, purchasing the neighbouring paddock or starting a business could produce greater lifetime wealth than KiwiSaver.
Supporters say compulsion will create a deeper pool of capital for New Zealand businesses and infrastructure. Yet around 61% of existing KiwiSaver assets are invested overseas.
A larger KiwiSaver pool does not necessarily mean a larger New Zealand investment pool.
I have another concern.
People earn income over a lifetime, not just between the ages of 25 and 65.
My father was an Anglican clergyman with six children, living on a modest stipend. My older brothers qualified for Dilworth School, established for “boys of good character from straitened circumstances”.
Had compulsory KiwiSaver existed, another slice of Dad’s income would have disappeared just when he was raising a family.
After retiring from the church at 65, Dad began a second career and continued working until he was 84.
The superannuation surcharge meant he received no National Super, something he accepted as entirely fair. When he finally retired, he was financially comfortable.
Compulsory saving is not necessarily the best answer for every individual at every stage of life.
Yet with National now supporting compulsory KiwiSaver, Labour having repeatedly campaigned for savings-based retirement schemes and New Zealand First and the Opportunities Party also supporting compulsion, some form of compulsory KiwiSaver appears politically inevitable.
Act is the only parliamentary party still opposed to KiwiSaver being compulsory, but even David Seymour has declined to say that he will make opposition a bottom line.
There is, however, a way for voters who oppose compulsion to influence what happens. Act should reframe the issue.
Act should campaign for any compulsory retirement saving to be tax deductible.
Employee KiwiSaver contributions are calculated on gross pay and are not tax deductible. We pay tax on the income that is paid into KiwiSaver.
There is an important difference between voluntary and compulsory saving.
If we choose to put some of our after-tax income into KiwiSaver, that is our decision.
If Parliament requires us to save a proportion of our gross income after taxing that income, technically it is not a tax, but it will certainly feel like we are being taxed twice.
I favour people providing for their own retirement.
Making compulsory employee contributions tax-deductible would not be cheap. A rough calculation suggests a 4% contribution might cost around $2b a year and the eventual 6% perhaps $3b.
The Government expects to collect about $133b in tax this year. Making compulsory KiwiSaver tax deductible would cost little more than 2% of annual tax revenue.
If we cannot vote on whether KiwiSaver should be compulsory, can we vote on whether politicians can tax the money they force us to save?
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