Simplicity chief economist Shamubeel Eaqub said NZ First’s pledge to raise the KiwiSaver contribution rate to 10% is essential, though offering a tax cut to balance the expenses would be difficult.
NZ First leader Winston Peters said his party intends to reform KiwiSaver by increasing the contribution rates for both employers and employees to 10% of income, alongside cutting taxes to compensate for the higher contributions.
“I think the tax cuts will be quite challenging just given the demographics of New Zealand. Our current tax settings are not really fit for purpose, so I don’t think the headline buffer will be available, but there are other ways of achieving that,” Eaqub said.
“For example, we could make the employer contributions compulsory and increase that gradually. Rather than a tax cut, it would essentially be paid out of KiwiSaver members’ own contributions gradually over time.
“That is much more likely to be sustainable and durable through the political cycle.”
He suggested that any modifications to KiwiSaver should be implemented gradually over a period of time.
“My personal belief is that a period of about 10 years to increase the contribution rates gradually would be just right.
“That gives us the opportunity to make the employer contribution compulsory and to increase the rate gradually over time so that people are not made worse off by this increased contribution.”
Eaqub said it is premature to implement means testing for NZ Super, as done in Australia.
“I don’t think we can move towards a means testing of super until we’ve given people the ability to save enough in their KiwiSavers.
“That’s why it’s so important to make sure a KiwiSaver is one, compulsory, and two, the contribution rates are high enough.”
“When that happens, roughly about 40% of New Zealanders will have enough savings to not need super.”
“Until we have done that, I don’t think we can do means testing.”
“But in the future, at some point in time, we must make New Zealand super means-tested so that those older people who need it, do have it.”