Scheme should be universal: consultant

Peter Smith.
Peter Smith.
Making KiwiSaver compulsory would be a good thing but it needed to be universal, with no special exemptions to degrade its effectiveness, Dunedin financial consultant Peter Smith said yesterday.

Commenting on Labour's KiwiSaver plan, Mr Smith, a principal of Kepler Group Otago, questioned why anyone should have an exemption.

''Why should beneficiaries not be able to join KiwiSaver? The Government could add the $521 to a beneficiary payment and take it off them in a compulsory payment to KiwiSaver.''

Labour leader David Cunliffe announced yesterday a government led by him would ensure all New Zealanders had a long-term nest egg and help them grow their KiwiSaver pool by an average of $150,000.

However, his statement then went on to say all employees aged between 18 and 16 - with the exception of students, beneficiaries and self-employed - would be automatically enrolled in KiwiSaver.

The opt-out provision would be removed although there are outs for the students, beneficiaries and the self-employed.

Labour would retain the $1000 kick-start and government contribution up to $521 a year. Labour would also increase the employer and employee minimum contribution rates gradually by 0.25% a year over six years, rising from the current 3% each to 4.5% in 2021.

Variable KiwiSaver contributions would be used as a way of controlling inflation rather than just relying on interest rates so people paid more into their savings rather than in higher mortgage interest rates, Mr Cunliffe said.

Mr Smith said the policy left more questions than answers for him.

''The idea of variable rates will be a nightmare for employers and the IRD.''

Instead of forcing the employers to match the contributions up to 4.5%, an employer could build an individual's KiwiSaver contribution into their salary, as it was done in Australia, he said.

The most disappointing thing in Labour's release was the lack of comment on default funds, he said.

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