Tremain Chris: KiwiSaver Bill — Third Reading 
Tremain Chris: KiwiSaver Bill — Third Reading 
[Volume:633;Page:5009] 
CHRIS TREMAIN (National—Napier) 
: 
 Jill Spooner vice-chairperson of the Association of Superannuation Funds of New Zealand today confirmed the warning that was delivered by my colleague John Key following last week’s last-minute announcement of changes to the KiwiSaver Bill. That warning is fourfold. Firstly it is that the specified superannuation contribution withholding tax changes advantage the new KiwiSaver programme at the expense of those hard-working Kiwis who have been diligently—I repeat diligently—taking personal responsibility for their own retirement. I suggest that there are many constituents of members on both sides of the House in that respect who have been taking personal responsibility for their own retirement and who have been squirreling away their hard-earned dollars in numerous superannuation schemes already in operation around this great nation. 
Secondly unless even further changes are made to the KiwiSaver Bill—as if there had not been enough already—to accommodate those existing savers with a similar tax advantage then we can expect closures of existing superannuation schemes with funds being distributed to beneficiaries. Thirdly mortgage diversion—that much-loved product of Mr Gordon Copeland—coupled with specified superannuation contribution withholding tax will ensure that KiwiSaver accounts are used simply as pass-through checking accounts to ensure that the specified superannuation contribution withholding tax break is received and that current savings habits for retirement such as buying one’s own home are not changed but continue unabated. Fourthly the on-the-hoof policy decision to implement a specified superannuation contribution withholding tax incentive and a mortgage diversion option which are both designed to encourage savings—as quite clearly put by Mr Shane Jones coming from the deep dark ether—could in fact reduce the net wealth of New Zealanders. 
It is somewhat ironic then that these statements are being made at the ninth hour of this legislation when those concerns—plus many others—were raised at the Finance and Expenditure Committee by various submitters many many months ago. To be honest most submissions were broadly supportive of the purpose of the bill but that was where it finished—at the purpose which is to encourage a long-term savings habit. The likes of the Financial Services Institute of Australasia Aon and Business New Zealand were supportive of the intent of the bill and considered it to be a “laudable objective”. The likes of BNZ and Fidelity Life were supportive of “the need for a culture change and the development of a long-term savings habit.” Despite this by far the majority of the submissions to the Finance and Expenditure Committee expressed either reservations or more so considerable reservations about the success of KiwiSaver. The Public Service Association expressed that “even with KiwiSaver many people will still under-save.” The Investment Savings and Insurance Association said that KiwiSaver was “not bold enough to prompt a long-term change in savings habits.” AMP said that it “would not address the magnitude of the issue” and the Retirement Policy and Research Centre said that “the purpose of this scheme is unclear and will not change long-term economic performance.” ING Mutual Fund Ltd and ANZ said that “the home loan assistance provisions are inconsistent with the objectives of the bill.” Most telling was the Association of Superannuation Funds which initially said: “The scheme’s objectives will not be achieved but considerable expense will be involved.” Today in light of the recent last-minute changes by Dr Cullen to the specified superannuation contribution withholding tax the Association of Superannuation Funds is crying foul after its members have been left high and dry. KiwiSaver participants will now receive a last-minute tax break on the specified superannuation contribution withholding tax while hard-working Kiwis who have been saving for years have been left out in the cold. 
In particular I would like to take up the issue raised by the Retirement Policy and Research Centre which said: “KiwiSaver will not prepare New Zealand for an ageing population as economic growth is the only practical method to alleviate this pressure.” Where do we sit in regard to economic growth? Well we are going backwards. We all know the statistics. In 1970 New Zealand sat neck and neck with Australia. Over the next 20-year period we grew at an average of 1 percent per annum. The innovative and visionary changes of the late 1980s and early 1990s allowed this nation to grow at a significantly higher rate averaging 3 percent per annum up until last year. The current Labour Government has sat back and taken credit for the economic growth when it knows full well that its own policy agenda has been one of social transformation as opposed to an increase in the income and wealth of hard-working Kiwis. Right now we face a period of high inflation—inflation is topping 4 percent at the moment—coupled with much lower economic growth projections which are well below what we have achieved in the last 15 years. 
That outlook will increasingly pull us further away from the incomes achieved by our closest neighbour it will continue to send more and more Kiwis overseas and it is a recipe for making an increase in savings even more difficult. It does not matter how good KiwiSaver is if hard-working Kiwis are not earning enough money to pay for the basics in life—as was so adequately pointed out by my colleague Hone Harawira. While inflation is eating away any increase in Kiwis’ wages they will find it difficult to save. 
I would now like to focus on KiwiSaver and its impact on small businesses. Recent changes have focused purely on the benefits to employees. There are now incentives to join the scheme—the $1000 after the first year the specified superannuation contribution withholding tax break and of course the mortgage diversion. Quite frankly employees would be silly not to take up the opportunity to use KiwiSaver as a pass-through account to get the tax break and to pay it off their own mortgage. The opportunity costs of carrying a mortgage with a higher interest rate than that being earned in KiwSaver makes it illogical not to use KiwiSaver as a pass-through account while one still has a mortgage on one’s house. 
Employers become the conduits for a tax break via a complex pass-through account. They are expected to act in good faith towards this scheme when I know that it will add significant costs to their organisations. Mr Jones had the cheek to say that there would be no compliance costs to businesses involved in this scheme when he knows well that there will be significant costs in terms of the advice on the scheme that employers will be expected to provide and the processing of refunds for those who opt out. Employers will be advising existing employees and helping them opt into the scheme dealing with the small refunds from the Inland Revenue Department and then passing them on to the employee dealing with changes of rates and changes in the scheme for employees who change their mind and dealing with temporary employees who wish to be KiwiSaver members. There will be significant compliance costs. 
There are no benefits to employers from this scheme. Should an employer choose to put in an employer contribution there is no difference to the employer as his or her contribution stays the same—totally tax deductible—whereas the employee will benefit to the tune of specified superannuation contribution withholding tax. No the employer will be expected to shoulder the costs of sign-up and sign-off credibility of the scheme education and change. I wonder whether the Minister of Finance has taken that fully into account and I suggest that perhaps this is the reason for the last-minute changes to the bill—the last-minute incentives to try to overcome the issues identified by submitters at the select committee hearing. 
I will close with a quick summary of the submissions compiled by officials at the select committee hearing: firstly KiwiSaver does not go far enough to increase savings rates; secondly the homeownership assistance is inconsistent with the purpose of encouraging saving for retirement; thirdly KiwiSaver is expensive and there has not been enough research on whether it will increase saving; fourthly and finally KiwiSaver will not prepare New Zealand for an ageing population. The policies that focus on growing New Zealand’s economic pie and on growing wages for all New Zealanders will be the key to asset accumulation and to long-term savings.