KiwiSaver has been good for the country and great for its participants. Since its introduction in 2007, it is estimated that funds in KiwiSaver schemes now add up to approximately $57 billion. That is an enormous amount of money locked into investment funds, most of which is going to be there for a long time yet.
One of the biggest attractions about KiwiSaver is that, although the scheme is administered by IRD and there are certain tax benefits for participants, the government cannot get its hands on member funds. All contributions are passed on to the funds within a month of receipt by IRD. The scheme is even better than that because if your contributions are not paid over by your employer, the government will guarantee them. In other words, you won’t lose out because your employer is shonky.
So what’s not to like?
Well, the latest proposals around the availability of KiwiSaver funds after retirement give cause for considerable concern.
KiwiSavers’ nest eggs should be transferred into a state-guaranteed scheme at age 65 to provide them with incomes for life, pensions experts say.
The proposal, dubbed KiwiSpend, came in a report prepared for the Commission for Financial Capability by Susan St John and Claire Dale from Auckland University’s Retirement Policy and Research Centre.
KiwiSpend could be used by people to supplement NZ Super to live comfortable lives in retirement, without running the risk of outliving their savings, seeing them eaten away by inflation, or lost in unsuccessful investments or financial exploitation, they said.
In other words, you are deemed responsible enough to save for your retirement for 20 years or more but are not considered responsible enough to be able to handle the money once it becomes available. Yes. That makes sense.
The modelling suggested a “fair price” for a $12,000 KiwiSpend annuity would be $158,000 to $174,400, but St John and Dale said the scheme might require taxpayer subsidies.
So they have arbitrarily decided that people who have reached retirement should only be allowed access to $12,000 a year OF THEIR OWN MONEY. Wow. Where do I sign up?
St John and Dale said that as KiwiSaver had been subsidised by taxpayers, the Government had a legitimate right to “ask for a return of some kind to society”.
What garbage. We get tax rebates on charitable donations and income protection insurance premiums. Do charities pay more tax as a result of the subsidies? They pay no tax at all.
Let us just stop and think about this for a minute. Most people in retirement, or close to it, with KiwiSaver funds, will not have a large nest egg yet, because the scheme has only been going since 2007. But in 20 years time, people will be retiring with funds between approximately $500,000 and $1.5 million. That will be a tidy little nest egg for your retirement, but it is money that you, and your employer, have put into the scheme for precisely that purpose.
Suppose these halfwits get their way, and on retirement, someone with $500,000 in Kiwisaver funds is allowed to access only $12,000 per year.
This means it will take over 40 years to spend the money in the Kiwisaver fund. And, unless the average life expectancy increases to approximately 150 in that time, this will mean that most people will never get access to all – or even most – of their own retirement funds. Who will get the balance? Your estate? Well, that wasn’t the reason you saved for all those years, was it? Or will it simply go to the Crown? Yes. How much do you want to bet that is what will happen?
This proposal has not been introduced by the government; rather by a bunch of well-heeled academics who think they know best, but the retirement commissioner likes the idea. And while the proposal is intended to be voluntary, you know what will happen. If introduced, it will be ‘voluntary’ for a few years… and then suddenly, it will be mandatory. You could bet the house on it.
The best selling point about KiwiSaver was always that the government couldn’t get their hands on your money. If anyone is mad enough to give this proposal the light of day, watch KiwiSaver contributions fall like a stone. And watch that $57 billion of investment funds dwindle away rapidly, as everyone who is able to withdraw their funds will do so rapidly. This is what happens when know-it-all academics think they can dictate what’s best for everyone.
Well, I’ll tell you something for nothing. They are not getting their grubby little paws on my KiwiSaver. I don’t care what I have to do. I’ll bet you feel the same way. In fact, I bet everyone does.