Save now for likely pension tightening
What would you have done with all that money, had KiwiSaver never been invented?
Research suggests just under a third of people’s contributions (31 per cent) would have gone on ‘‘daily spending’’.
That means KiwiSaver has encouraged some extra saving which is just what the Labour government which invented it wanted.
Roughly another third (32 per cent) would have been used by people to repay debt like reducing the mortgage, or paying off the credit card. That’s not so good. Encouraging people to carry interest-bearing debt for longer might make banks happy, but it wasn’t among the official aims of KiwiSaver.
The rest of the money saved into KiwiSaver would have been saved or invested anyway.
That research was done by survey for the Inland Revenue Department. It’s not a ringing endorsement of KiwiSaver.
It indicates, however, what a big effect on your household finances government retirement policy can have.
And the buggers keep changing things on us.
When planning, I find myself making spending and savings decisions based not only on current policy, but my guesses on what politicians will foist on us in the future.
KiwiSaver does seem to have brought savings discipline for about half of KiwiSavers who wouldn’t have been otherwise saving.
That’s good, as the tax-cut merchants have their knives out for New Zealand Super.
At the moment we have a universal, non-means tested NZ Super on which old folk can just scrape by, providing they own their own home.
Even at the current levels, many people believe NZ Super is not sustainable, meaning they don’t think future generations of voters will put up with paying for it at current levels. That’s because the population is ageing, and there will be more older folk for working folk to support.
The spectre of cuts to NZ Super, the raising to 70 in the age you get it, and even means-testing have all been raised.
The Retirement Commissioner has even talked about the possibility of governments around the world tapping the equity in people’s homes to help pay for their state pensions!
I expect the first change to be the lifting of the age people get NZ Super.
I imagine the future politician who announces it will tell people that KiwiSaver money will still be available at age 65.
I hear him or her saying the Government can’t afford to pay for early retirements.
People who want that luxury should spend their KiwiSaver money on it.
To me, the most likely future of NZ Super is that it remains as a universal pension paid alike to paupers and millionaires, but I expect it to be paid later, at a lower real amount.
Those who can’t carry on work before the new age of entitlement will have to live on their savings, or go onto a meagre benefit.
People who want equivalent living standards to today’s superannuitants will have to save more, and start saving earlier.
This outlook puts me among the KiwiSaver cynics, who don’t look at KiwiSaver and see retirement salvation.
But they do harden the resolve to scrape, scrimp, save, invest, and pay off the mortgage double quick so that whatever that future politician announces, the blow will be softened.
KiwiSaver cynics see KiwiSaver as playing only a part in preparing them for the uncertain future.