Winston Peters\u2019 1997 referendum on compulsory retirement savings was crushed by almost 92% to just over 8%.<\/p>\n
Labour campaigned twice more on savings-based retirement schemes, in 2011 and 2014, only to suffer heavy defeats.<\/p>\n
David Cunliffe\u2019s proposal was similar to what National is promising today.<\/p>\n
In contrast, Sir John Key remained sceptical of KiwiSaver, opposed compulsion and never lost an election.<\/p>\n
So what has changed?<\/p>\n
Voluntary KiwiSaver has become enormously popular. Around 3.4 million New Zealanders are enrolled. <\/p>\n
KiwiSaver funds now hold more than $140 billion.<\/p>\n
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.<\/p>\n
Recent polling has put support for compulsory KiwiSaver at around 70%.<\/p>\n
Polling often depends on the question. Had respondents instead been asked, \u201cDo you support making KiwiSaver compulsory and lifting contributions to 12% of income \u2014 6% from employees and 6% from employers?\u201d then I doubt support would still be anywhere near 70%.<\/p>\n
Behaviour often tells us more than opinion polls.<\/p>\n
The Financial Markets Authority reports 30% of working-age KiwiSaver members are not contributing.<\/p>\n
Another 84,000 are on savings suspensions. Financial hardship withdrawals exceeded $400 million in the last reporting year.<\/p>\n
Increasing contributions and making them compulsory will have a significant financial impact.<\/p>\n
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.<\/p>\n
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.<\/p>\n
A larger KiwiSaver pool does not necessarily mean a larger New Zealand investment pool.<\/p>\n
I have another concern.<\/p>\n
People earn income over a lifetime, not just between the ages of 25 and 65.<\/p>\n
My father was an Anglican clergyman with six children, living on a modest stipend. My older brothers qualified for Dilworth School, established for \u201cboys of good character from straitened circumstances\u201d.<\/p>\n
Had compulsory KiwiSaver existed, another slice of Dad\u2019s income would have disappeared just when he was raising a family.<\/p>\n
After retiring from the church at 65, Dad began a second career and continued working until he was 84.<\/p>\n
The superannuation surcharge meant he received no National Super, something he accepted as entirely fair. When he finally retired, he was financially comfortable.<\/p>\n
Compulsory saving is not necessarily the best answer for every individual at every stage of life.<\/p>\n
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.<\/p>\n
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.<\/p>\n
There is, however, a way for voters who oppose compulsion to influence what happens. Act should reframe the issue.<\/p>\n
Act should campaign for any compulsory retirement saving to be tax deductible.<\/p>\n
Employee KiwiSaver contributions are calculated on gross pay and are not tax deductible. We pay tax on the income that is paid into KiwiSaver.<\/p>\n
There is an important difference between voluntary and compulsory saving.<\/p>\n
If we choose to put some of our after-tax income into KiwiSaver, that is our decision.<\/p>\n
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.<\/p>\n
I favour people providing for their own retirement. <\/p>\n
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.<\/p>\n
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.<\/p>\n
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?<\/p>\n