SOS: save our savings from Cullen’s sorcery

The Kiwisaver scheme, proudly introduced by Michael Cullen when Clark and her coven were running the shop, was supposed to perform the alchemy of lifting the nation’s savings

Guess what?

Black magic. The savings habit has been shrunk.

The number of New Zealanders saving regularly has dropped in the past four years despite more than a quarter of adults joining KiwiSaver.

A Retirement Commission survey carried out in March and April has found that only 49 per cent of adults aged 18 and over are now saving regularly, down from 53 per cent in the commission’s first survey in 2005.

Although 29 per cent have joined KiwiSaver, this has been partly offset by declines from 23 per cent to 18 per cent in the numbers in personal superannuation schemes, and from 16 per cent to 14 per cent for those in workplace super schemes.

The survey has been released today, coinciding with a Research New Zealand poll which shows the majority of New Zealanders are worried about how future governments will provide for the retired.

Alf was fascinated. He remembers Minister Michael Cullen and Commerce Minister Lianne Dalziel not so long ago naming six default providers they intended to appoint for KiwiSaver.

Dr Cullen said the announcement of the default providers is an important step in the introduction of the scheme which aims to help New Zealanders develop long-term savings habits and will give them more choices for securing their financial futures.

Oh, and Alf was in the House on 7 March 2006 when Cullen introduced the KiwiSaver Bill for its first reading.

This Bill adds an important new element into the savings landscape. It creates a vehicle for encouraging all working New Zealanders to set aside a portion of their earnings to fund their long term income security.

He warbled about the Labour Government’s recognising the need for government to show leadership in providing workplace savings options by introducing the State Sector Retirement Savings Scheme, a voluntary savings scheme aimed specifically at state sector employees.
KiwiSaver built on that, providing easy access for all employees to a long term savings scheme.

Like most western nations, New Zealand has struggled to achieve high rates of participation in long term retirement savings schemes. While New Zealand Superannuation provides a base level of income in retirement, it has always been clear that most New Zealanders will have to top this up with their own savings in order to avoid a significant drop in income during retirement. The current savings environment provides little encouragement for New Zealanders to address this issue early in their working lives, with the result that many do not develop a regular savings habit and delay any serious attempt to save until relatively late in their lives.

KiwiSaver addresses that problem, not through compulsion or through distortionary tax breaks, but through a relatively simple mechanism of automatic enrolment. KiwiSaver focuses on encouraging saving in the workplace. This allows for deductions at source, provides benefits from economies of scale, and reaches a high proportion of the population who are able to save.

Wonder where Cullen is this morning? And what would his spin doctors have said about the consequences of his sorcery, if he still employed them?

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