4. Hon MARK GOSCHE (Labour—Maungakiekie) Link to this
to the Minister of Finance
What reports, if any, has he received on the reaction to the changes to the KiwiSaver scheme he announced last week?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I have received a large number of overwhelmingly positive responses. According to Jonathan Eriksen, they transform KiwiSaver into a state of the art, elegant, simple, yet effective retirement savings scheme. They have been welcomed by the New Zealand Exchange and its head, by the insurance and savings institute, and by “even the ranks of Tuscany”, in the forms of the Dominion Post and the , which “could scarce forebear to cheer”.
What reports has he seen on the inflationary impact of the changes to KiwiSaver announced last week?
Hon Dr MICHAEL CULLEN Link to this
I have seen a report—a somewhat isolated and unusual one—arguing that increasing savings will be inflationary and could lead to greater consumer spending. That report comes from John Key, who now seems to have joined the Jacqui Dean school of economics.
Chris TremainDoes the Minister agree with the report in Friday’s New Zealand Herald from Craig Macalister, tax director for the Institute of Chartered Accountants, which stated that KiwiSaver was receiving favourable treatment over other savings schemes; if so, what message does that send to the hundreds of thousands of hard-working Kiwis who are saving for their retirement already?
Hon Dr MICHAEL CULLEN Link to this
That, of course, applies only when there is already an employer contribution, which in most cases is above the level that qualifies under the KiwiSaver scheme for the favourable tax treatment.
R Doug WoolertonCan we take the Government’s willingness to use tax incentives within the KiwiSaver scheme as an indication that it will look to extend the use of tax incentives within its policy programme; if not, why not?
Hon Dr MICHAEL CULLEN Link to this
I was told that the first time would be the hardest, and the second might be easier in that respect.
Tariana TuriaTēnā koutou katoa. What reports has the Minister received from Te Pūkenga Here Tikanga Mahi, the Public Service Association, regarding the retirement income report that noted that 30 to 40 percent of New Zealanders with low incomes were unlikely to have disposable incomes to save for retirement; does he agree, therefore, that KiwiSaver unfairly discriminates against a group of New Zealanders, a high proportion of whom are Māori?
Hon Dr MICHAEL CULLEN Link to this
It is important to understand what the purpose of retirement savings is. Fundamentally, the purpose of retirement savings is to smooth out one’s lifetime income—in other words, to produce in retirement a reasonable replacement rate in comparison to one’s income during a working life. For people who are on very low incomes, New Zealand superannuation represents a reasonable replacement rate. That is why it is very important to maintain a strong consensus in favour of the current provisions around New Zealand superannuation and to secure the funding for that, which, of course, is what we have done with the New Zealand Superannuation Fund.
Te Ururoa Flavell Link to this
What reports has the Minister received from the independent actuary Kelvin Prisk that the $1,000 initial incentive for KiwiSaver is too low, compared with the tax incentives in many jurisdictions?
Hon Dr MICHAEL CULLEN Link to this
On the one hand I have been advised that it is so large that everyone will rush in just to get it, then will have to continue to contribute for a year to KiwiSaver; on the other hand, I have been told that it is not big enough. I think it depends to a large extent on what one’s income is. To the kind of lofty people who write those kinds of reports, $1,000 is not very much. For a lot of people in the target group for KiwiSaver, that as a sweetener to get into the scheme is actually a significant increase, particularly spread over a lifetime as that money accumulates.
Craig FossWhy did the Minister reject the unanimous opinion, formed after months of consideration, of the Finance and Expenditure Committee—which includes members of the Labour Party and United Future—and of senior Inland Revenue Department and Ministry of Social Development officials, as stated in the commentary on the KiwiSaver Bill, not to proceed at this time with a mortgage diversion facility?
Hon Dr MICHAEL CULLEN Link to this
There were, of course, objections from some of the banking sector, which is why the scheme originally did not include that. [ Interruption] It was not in the bill in the first place; Dr Nick Smith should read the first reading version of the bill. It was a decision taken by the Government. However, certainly United Future was keen to see that provision included in the bill, but, more important, I was always keen to provide a mechanism whereby people could stay in KiwiSaver while repaying their mortgage, as opposed to withdrawing completely from the scheme while they repaid their mortgage. I think the new version, which is different from that originally proposed, will achieve that kind of balance.
I seek leave to table the article in the New Zealand Herald dated Friday, 25 August 2006, in which Craig Macalister points out that KiwiSaver is receiving favourable treatment over other savings plans.
Madam SPEAKER