Copeland Gordon: KiwiSaver Bill — Second Reading 
Copeland Gordon: KiwiSaver Bill — Second Reading 
[Volume:633;Page:4858] 
GORDON COPELAND (United Future) 
: 
 I very much rejoice in the second reading of the KiwiSaver Bill. In many ways a bill such as this—which is based on a workplace savings process and in fact is a voluntary process—is about 30 years overdue. It was way back in 1975 when Rob Muldoon decided to can the newly announced State savings scheme for New Zealanders. I believe that was actually one of the worst decisions a Government has ever taken in my lifetime. 
That decision was taken at about the time when the State of Singapore launched its State savings scheme. At that stage the Singaporean economy—and the standard of living—was a mere fraction of what it was in this country. Today when we look at our two countries we see that we are a long way behind Singapore. One of the reasons for that is the tremendous spurt and transformation of its economy that has occurred as a result of the Singaporean State pension and State savings scheme. 
I would like to say today to the members of National now that I know they are reconsidering their position on the KiwiSaver Bill that they should put their minds forward on the horizon and ask what is genuinely good for New Zealand and what will grow our economy. For goodness’ sake National should not go down the road of a previous National administration that pulled the plug on something that had such potential to deliver so much for New Zealand. We are all living with the consequences of that decision today. As the previous speaker from the Maori Party Hone Harawira has clearly outlined with the degree of poverty that exists in our country those results have not been positive for New Zealand. I think National members should recall that important part of history when they are making their minds up about whether to support the bill. I encourage them to support the bill because it is good for New Zealand. 
I am very pleased to say that United Future has had a massive input into the design of the bill as it is now emerging. In the last Parliament as part of our 2005 Budget bid we asked the Government whether it could bring into the bill some way of specifically helping Kiwis to get into their first home. That initiative has been adopted by the Government. Since I have been on the Finance and Expenditure Committee I have seen the papers that the officials produced for the Government of that time. Those officials said that that initiative would be incompatible and inconsistent with what the Government was trying to achieve. 
United Future was there at the time saying to the Government: “No it’s not. Getting into your first home and paying off a mortgage is the root to a good standard of living in retirement.” One has only to look at the difference between people who own their own homes and go into retirement mortgage free and those who are still paying rent to see the reality of that. It makes an enormous difference. We are delighted therefore that we were there at the time to say to the Government: “No no no. Please overrule your officials because this is a worthwhile thing to do.” As a result we will see many more New Zealanders get into their first homes through the $5000 per saver subsidy from the Government than would have been possible without this bill. United Future was there at that time. 
We were there again to consider this mortgage diversion arrangement. When Dr Cullen outlined to me in the 2005 Budget—or preliminary to it—that he would put a mortgage diversion scheme into KiwiSaver I thought to myself that it was a fantastic idea. I could see immediately that it could be a critical success factor because I knew that many many people in our country could not service a mortgage and also save for their retirement at the same time. They simply have not got the income to do so. As many people have said with the record levels of household debt we now have that is more difficult to do than ever before for most families. Therefore to have the ability to divert part of their KiwiSaver contribution over to servicing a mortgage so that they could do both at the same time I thought—and I still think—was a win-win situation. 
I was therefore very very disappointed when I found out in about March this year that Cabinet had decided to drop the mortgage diversion aspect of that original scheme. It did so on the basis that there were questions about compliance costs and a lack of interest from the Bankers’ Association. Well KiwiSaver is not about the Bankers’ Association; it is about helping ordinary New Zealanders to obtain the ability to buy a house the ability to service a mortgage and the ability to save for their retirement—that is what it is all about. I could not care less about whether it is inconvenient for the banks because they simply need to wise up and I am sure they will. I am sure the banks will embrace the mortgage diversion scheme as it has been announced today because it is in their interests to do so. Banks also have an interest in making sure that people have the ability to service mortgages because as Jeanette Fitzsimons has pointed out so eloquently they are in the business of lending money to make money. 
I want to say also that the mortgage diversion scheme which I will probably speak a bit more about in the Committee stage of the bill really does address a very important point for New Zealanders and for families. Let me give members an example of a person who is on the average wage of about $43000. This person will under the bill contribute 4 percent or $33 a week of that amount to KiwiSaver. Under the mortgage diversion scheme however that person who is saving $33 a week will be able to divert half of that or $16.50 a week to the servicing of his or her mortgage. That will make a huge difference. 
Many submitters came to the Finance and Expenditure Committee and said to us that their great fear about KiwiSaver was that people would join in order to save money for the 5-year period required so that they could get the $5000 subsidy from the Government as a deposit on their first home. The submitters added that when those people had done that probably all that would remain in KiwiSaver for the next 25-30 years while they paid their mortgage off would simply be the $1000 contribution the Government had put in. The submitters said that that was therefore not great because they would be administering potentially thousands of small accounts with no additional funds coming in. 
I believe that was a fair evaluation by those submitters of the potential that this bill had without the all-important mortgage diversion aspect to it. Now with the mortgage diversion in place many more people will stay locked into KiwiSaver and will continue to give credit knowing full well that they can then take 50 percent of what they put in back out. In a funny kind of a way we got to a point where Jeanette Fitzsimons said to the select committee that we should have a 2 percent option. In a funny kind of way if we look at it now we see that people put their 4 percent in but can take out 2 percent to service their mortgage. So their net contribution will be 2 percent. That in itself will bring a lot more people into the loop. Incidentally I would like to thank the Green Party and the Maori Party for voting in favour of the mortgage diversion option at the select committee. 
I must say there are days when I find that I really am in the right party in being part of the radical centre and being able to come to issues like this with a degree of common sense without trying to get into the ideologies of the right or the left. I find it interesting for example that John Key’s comments today really had little credibility when he perhaps forgot to mention that the National Party had also voted against mortgage diversion at the select committee. At the end of the day it was just a question of letting the volume go down a bit and of people actually sitting back having an objective look at what is a common-sense idea and saying: “Yes that is OK; let’s go with it.” Actually that is all that happened. 
I say to Craig Foss that the fictional ideal he has come up with that somehow there was some sort of trade-off against the adjustment of tax brackets reminds me of a lot of people who read  
The Da Vinci Code 
 and do not know the difference between fact and fiction—and people are right into fiction when they go down that line I assure him. The reality is much different. It is just a question of people having the wit to adopt an idea that will be good for New Zealand and good for our future. 
There are a couple of other things that I think it is important to state. The commentary on the bill talks about insurance and annuities. I want to talk about the life insurance aspect. In my experience it is quite important that while people are paying off a mortgage trying to save for retirement and so forth they also have life insurance. I have seen tragic examples of breadwinners with no life insurance who have died and left behind wives and children. We have included this to remind people and scheme providers that they can provide a life insurance option as part of their scheme. In that case the savers would need to pay in their 4 percent plus the cost of the premium on the policy. They can do that through the existing mechanism quite simply and I would encourage scheme providers to do that because it will be helpful to those people. 
Another issue that we debated and I got some clarity on was the ability of scheme providers to use an Inland Revenue Department number so that people have the one number for KiwiSaver and the scheme provider all the way through. That will reduce compliance costs which is also a positive aspect.