Friday 9th of May 2008

It's getting harder and harder to ignore KiwiSaver as the months roll on. Currently 600,000 people have signed up – two thirds more than predicted, when it started 10 months ago. That's pretty impressive. As often happens when something like this grows successfully, we see the opponents come out with so-called "research", bagging the policy. This week it was the turn of right-wing think tank, the Centre for Independent Studies in a paper called KiwiSaver or KiwiSucker - A Critical View. Frankly the paper and the quality of its analysis was poor and subjective. However, it does raise some valid points about the overall cost of the scheme – the Retirement Commissioner has raised these too – and the "equity" issue. That is, it favours those who sign up. Unfortunately, unless you move to compulsory savings, that is an issue which we have to live with. I would suggest that another example, or way of looking at this is with GST. While it is a universal tax, it benefits the rich. People on lower incomes have to spend all their income to get by and pay GST on all that money. People on higher incomes don't spend everything and save some of their money. On this "unconsumed" money, they don't pay GST. One of the strange comments in the report was that some advisers suggest it is logical that people borrow on their credit cards to invest in KiwiSaver. I find this hard to believe – maybe someone can enlighten me here? What is useful to watch is how KiwiSaver is changing the funds management industry. The latest numbers from FundSource, which we have on the site, show that money is starting to flow into these products and that other parts of the industry are seeing outflows. To me, KiwiSaver and PIE tax changes are having massive influences on the shape of the industry.