Tremain Chris: KiwiSaver Bill — Second Reading 
Tremain Chris: KiwiSaver Bill — Second Reading 
[Volume:633;Page:4861] 
CHRIS TREMAIN (National—Napier) 
: 
 Late changes to the KiwiSaver scheme announced today are generally positive but like much of the KiwiSaver scheme they come as last-minute alterations—as rushed and piecemeal legislation. Mr Copeland rejoices in the new legislation and Mr Cullen says it is landmark legislation. I have nicknamed the bill “The Great KiwiSaver Sailor”. It is a lot like the  
Titanic 
 when it first left Southampton for New York. It was a huge ship grand and impressive. It was one man’s baby complete with all the bells and whistles and the things to make people go “Wow!” but it was built with serious design flaws and was heading towards a field of very large icebergs. 
From the outset the National Party believed that this important legislation required significantly more thought and better design. It has been rushed through to meet an unreasonable deadline. Last-minute changes to the bill prove this. Last-minute tax changes to incentivise employers’ contributions are a hint. Dr Cullen acknowledges that the scheme will not work without ongoing incentives. As Mr Key said today it is policy on the hoof. Last-minute changes were made 4 hours before this second reading today. Last-minute changes to allow mortgage diversion are an acknowledgement that the initial thinking which tried to connect the retirement savings scheme with a first homebuyers scheme was faulty. 
Let me explain how desperate these measures are. Let me explain where this boatbuilder may be taking this boat. The best example of the new measures is the change in the support of the mortgage diversions. The initial scheme did not propose mortgage diversions; the initial scheme proposed that new homebuyers would enter this scheme to take advantage of the new home-loan option—a means of saving $10000 by way of a $5000 input from the Government and a $5000 input by the individual over a period of 5 years. That is an admirable goal but it gives no consideration to the points that Hone Harawira raised earlier. The fact is that many hard-working Kiwis do not earn enough take-home pay in the first place. In fact they are so overtaxed that saving is a distinct dream. Recent economic growth projections with the likes of 0.1 percent and negative 0.1 percent growth earlier this year are certainly not putting us on any path towards improving that situation for the average Kiwi. It is my opinion that the Government should be focusing on policies that take economic growth forward in leaps and bounds. 
In addition the bill gives no consideration to the fact that many Kiwis will use KiwiSaver to get their initial homeownership payout then will simply abandon their account and leave it dormant. They will continue down the track of building their retirement savings through the traditional Kiwi means of paying off their mortgage. That is how most Kiwis have created a nest egg in retirement. They have been able to build equity over a period of time stay up with the market and use that equity in their retirement. But the Government in its rush to keep the ship on track knowing that many Kiwis will bail the ship once they have their $10000 out for their homeownership requirements will be in a difficult situation. In this situation—and this is about Gordon Copeland’s mortgage diversion thing—the select committee rejected the idea in the first place. Even though Mark Gosche stood up this afternoon and told us that we supported that he failed to read a particular part in the commentary on the bill that states: “Therefore and because of time constraints we were advised that mortgage repayments would be best handled through financial education and the contributions holiday mechanism.” The fact of the matter is that we decided not to go with it. Yet 4 hours before this reading a press release has come out from Dr Cullen and we are now having to deal with these policy changes on the hoof. 
So these latest changes—last-minute boilermaking—seek to further keep the  
Titanic 
 afloat. But really these changes are like patching a gaping hole in a hull of paper. This  
Titanic  
piece of legislation has from the beginning been veering off course and Dr Cullen has sought to bring it back on track with additional legislation and last-minute incentives. 
Let us have a look at some of the icebergs that have got in the way of this  
Titanic 
 and I will speak to five particular key areas. Firstly there is the responsibility of employers in this particular legislation. Secondly there are employer compliance costs which have been well overlooked. Thirdly there is the issue of compulsion. Fourthly there are contribution rates. Lastly there is the KiwiSaver implementation time frame. 
Let us come to the first point of employer responsibility for decision making. In the bill employers were initially going to be responsible for making the decisions. That has now changed and they will not be responsible. However the reality is that employees will be faced with four to five default providers with four to five potential prospectuses in front of them. It will fall to employers to understand those prospectuses and I suggest to members today that most of those employers will be faced with employees coming to them and saying: “Hey boss sure there’s been some ads on TV but to be honest with you I haven’t got time to read through a 50-page submission. What do you think?” As per normal in those sorts of situations bosses will be faced with trying to give some advice to their employees. I ask members not to overlook the importance of the employers in this situation. It is critical to get employers on side from day one. 
Secondly I want to talk about employer compliance costs. In the Finance and Expenditure Committee Jeanette Fitzsimons tried to play that out—to understand what the compliance costs were for employers because she could not just see it. The fact of the matter is that employers will be responsible for making—or helping to make—many of these decisions. They will have to change their software in order to comply with the new requirements for deducting the KiwiSaver contributions. In particular when the cost of refunds comes up—with the ability to be able to opt out after 2 weeks—the issues involved in getting a refund after a 2-week contribution are significant and will have huge compliance costs. 
The third point is the issue of compulsion. At the moment the compulsory register only applies to new employees who may opt out after 2 weeks. There will be significant issues around employees who move from job to job and work on a short-term basis; they are covered in another part of the bill. However there is significant complexity in the refund situation. 
The fourth point is the issue of the contribution rates of 2 percent 4 percent and 8 percent. Obviously the New Zealand Council of Trade Unions wanted the rates to be as low as possible but it was just impossible for us to see the impact of a 2 percent payment and how it would deliver any sort of significant growth to employees. 
Lastly National believes the KiwiSaver implementation time frame is too tight. We do not believe there is enough time within which to wind up superannuation schemes. We believe that the marketing and knowledge that needs to be imparted to employers and employees will be difficult within the time frame. We are really concerned that if the scheme is not launched correctly there will be a loss of credibility in the first place. The last-minute changes that have been made are just that; they are last-minute cries to try to bring this mighty ship back on to the straight and narrow and to avoid the icebergs in order to ensure the scheme’s success. National was given just 4 hours’ notification of those last-minute changes and is reserving its decision on this bill going forward. National believes that the legislation—while having merit—has been too rushed and has not dealt well with many of the issues especially the ongoing incentives to ensure that people not only take up the scheme but keep it rolling on. We believe that it is critical to ensure a good launch of the scheme so that it does not become the  
Titanic 
 of the savings industry and so that this  
Titanic 
 makes it across the Atlantic to New York.