Parties split over Kiwisaver proposal

Politicians are divided over a suggestion by the Financial Services Council for an increase in KiwiSaver contributions to 10 per cent of incomes to help pay for Superannuation.

The council, which represents investment and life insurance companies, says raising KiwiSaver contributions by 1 per cent a year will enable people to still retire at 65, despite the growing costs of the scheme because of the ageing population. The increase in both employer and employee contributions would be put on hold until the economy grew again.

Chief executive Peter Neilson said New Zealanders surveyed by the council said they could not live on the current Super payment of $349 a week.

Expanding KiwiSaver would enable them to use that saving to pay for their retirement at 65 until the future eligibility age, of perhaps 67, kicked in.

It would also enable people to double the amount they received in Super.

The council’s report found Super in its current form could not be maintained without raising taxes or the age of eligibility.

Labour leader David Shearer said it was a ‘‘wake-up call’’ for Prime Minister John Key, who has ruled out raising the age of eligibility while he is in power.

‘‘John Key can’t keep putting off the hard decisions for some other government to deal with. That’s a cop-out. All New Zealanders have a right to look forward to a decent retirement. And that means we must make tough calls now so that we can afford it.’’

NZ First leader Winston Peters said the council’s call was ‘‘hopeless’’.

‘‘We offered people a straight tax break so they could painlessly save.’’

The crisis in Super was ‘‘manufactured’’ by certain elements in the finance sector, he said.

The council’s idea was the first step in privatising Super, Mr Peters said, but did not elaborate.

It was fair that over 65-year-olds who were still working received the pension.

‘‘For decades we all believed in a universal scheme whereby if you worked hard and you saved, you should not be punished.’’

Greens co-leader Russel Nor- man said the council’s idea should be discussed.

One of the problems was only people who could afford to be in KiwiSaver, and increase their contributions, would be able to retire at 65, when it was often low-paid manual workers who needed to retire earlier. ‘‘That’s the impact of the low-wage economy.’’

The Greens want a public KiwiSaver fund which would reduce fees and enable more low-waged people to take part in the scheme.

A spokesman for Finance Minister Bill English said the Government was already increasing the rate of employee and employer contributions to KiwiSaver from 2 per cent to 3 per cent next April.

‘‘We believe this strikes a good balance between supporting saving while keeping KiwiSaver affordable for New Zealanders.’’

When the Government’s books were back into ‘‘sufficient’’ surpluses, the Government would resume contributions to the Super fund and expand the number of people in KiwiSaver through auto enrolment.

The Government had no plans to increase KiwiSaver contribution rates any further.