Call to free up KiwiSaver
Auckland lawyer Vicki Pomeroy wants to turn the clock back to the early days of KiwiSaver when people with mortgages could save less into their locked retirement accounts, and still get their full employer contributions and taxpayer-funded incentives.
Pomeroy has petitioned Parliament to allow homeowners to stop their personal contributions to KiwiSaver so they can repay their home loans faster, without losing access to the free money from their employers and the government.
She asked for Kiwisaver laws to be changed to treat principal repayments on contributors’ mortgages to be counted KiwiSaver contributions, so they still qualified for employer contributions and member tax credits (MTC).
When KiwiSaver was created, it was initially designed to allow savers to ‘‘divert’’ part of their contributions to pay off their mortgage while at the same time still getting employer contributions and MTCs.
But mortgage diversions were ended in 2009.
Pomeroy said the Covid-19 economic crisis had revealed the risks of enticing people to invest in sharemarkets through KiwiSaver instead of repaying their mortgages faster.
‘‘Forcing people to pay into what can be risky low-return overseas managed funds while possibly paying higher interest on their own mortgages is nonsensical,’’ she told MPs.
‘‘Own homes can have a far safer and better return than managed funds.’’
And, she said: ‘‘They can be used for reverse mortgages at retirement.’’
Homeowners could also trade down at retirement to free up cash, Pomeroy said.
KiwiSaver funds have been hit with sharemarket falls as a result of the Covid-19 pandemic.
In the three months to the end of March alone, the average multisector category returns ranged from -2.2 per cent for conservative KiwiSaver funds to -14.5 per cent for aggressive funds.
Pomeroy would like MPs to go further than the KiwiSaver mortgage diversion scheme, by allowing use of employer contributions to pay off their mortgage too.
‘‘Why should you have an incentive to have funds that fund managers get rich off ... when you don’t have an incentive to make a good strong investment to provide for your family in a concrete way for your own retirement,’’ she said.
Pomeroy’s is the fourth petition to Parliament on KiwiSaver from people who believe the pandemic has revealed KiwiSaver to be preventing people from using their own money to increase their financial stability as unemployment heads towards double digits.