From a fledgling scheme in 2007, the brainchild of Sir Michael Cullen has grown to accommodate 2.8 million members. When launched on July 2, 2007, no one expected the scheme to be as popular as it has been.
KiwiSaver was dreamed up by Sir Michael while on his summer break from parliament. It was hatched during an economic period similar to what we are experiencing now. Consumption and migration were leading growth, and house prices were soaring. There was a need to encourage more saving and provide more liquidity for capital markets, in the hope it could also take the heat out of the property as an investment.
While the contribution rates and government benefits have been tinkered with over the first decade of KiwiSaver, there is little doubt about its success and how it has contributed to New Zealanders starting to think much more seriously about their retirement savings. However, Sir Michael is still very critical of the decision to tax employer contributions in 2012. This tax significantly impacts the end value of a member’s savings at age 65 and is one aspect of the current regime that he feels should be removed.
When asked what he would do differently, Sir Michael indicated that having children eligible for the $1,000 kick-start was a big mistake. He now believes the membership age should have been restricted to those aged 18 or over or working full-time.
An area of disappointment has been the take-up of KiwiSaver membership by those on lower incomes due to affordability, especially as this is the group that could benefit the most.
Sir Michael also feels it is important to conduct research into why a significant number of KiwiSaver members were contributing less than they should or could. Understanding the reasons is important before solutions can be considered.
Despite this, Sir Michael rates the scheme highly and looks back on it as one of his most important achievements during his time in politics. Not a bad outcome for an idea during a summer holiday!
(Adapted from an interview published in Asset Magazine – July 2017)
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