Has KiwiSaver really saved New Zealand?
Almost exactly a decade after the scheme was launched, we ask: Has KiwiSaver saved New Zealand?
KiwiSaver was introduced in 2007 to encourage Kiwis to, er, save for their retirement and to lift New Zealand’s low national savings rate.
In particular it was hoped the scheme would encourage retirement savings amongst people who experience lower living standards in retirement.
‘‘KiwiSaver aims to improve the long term savings habits of New Zealanders and builds on our efforts to better prepare the country for the challenges of an ageing population,’’ said Dr Michael Cullen, the Finance Minister at the time.
‘‘KiwiSaver will help lift economic performance. If we save more, we will no longer need to borrow so much from overseas to finance consumption and business expansion at home,’’ Cullen said.
Has it worked? New Zealand had negative national savings in all but one year between 1995 and 2009.
The national savings rate has been in positive territory for five of the past six years, for which data is available.
The rate is still low compared to other developed countries - the OECD ranks New Zealand 17th out of 33 developed countries in 2015, with a 6 per cent national savings as a proportion of GDP.
And whether the improvement can be attributed entirely to KiwiSaver is uncertain, given the many other factors impacting the economy and national savings.
What about individuals? By one key measure, KiwiSaver has been a roaring success.
The scheme’s goal of encouraging people into retirement savings schemes has exceeded all expectations. Prior to its introduction, just 15 per cent of the workforce was enrolled in a work savings scheme.
By 2016, more than threequarters of New Zealand’s 18-64-year-olds were enrolled.
A similar proportion of those enrolled were on annual incomes of less than $60,000.
While the rate at which new members opt out has halved since 2008.
As of December 2015, the total value of KiwiSaver funds under management was $26.4 billion.
The first home withdrawal scheme had helped 74,000 Kiwi households into home ownership by June 2016. A further 47,000 withdrew money for reasons of financial hardship in the same period. But not everyone is convinced KiwiSaver is meeting its objectives.
In 2015 a joint Government agency report concluded that: ’’ ... the success of KiwiSaver in achieving its policy goals in the shortterm appears to be marginal at best.’’
‘‘There is concern over the amount individuals are saving, in particular the extent to which this is additional saving. The level of additionality has remained relatively constant between 2010 and 2013 and suggests only about a third of KiwiSaver contributions represent new savings,’’ it said.
However, the report did say that any short-term failures did not necessarily translate into failure in the long-term.
Another report by NZIER disagreed, concluding that, ‘‘KiwiSaver is likely to lead to an increase in net worth for those people to whom it is targeted, that is, members who do not already enjoy a high level of net worth and financial capability.’’