Media statement Saturday, January 12th, 2008
KiwiSaver success nowhere near yet
KiwiSaver is nowhere near the success Finance Minister Michael Cullen is claiming, the Employers & Manufacturers Association (Northern) says.
"KiwiSaver has not only lost money for its account holders so far but it hasn't increased the nation's total savings,
which was its main objective," said Alasdair Thompson, EMA's chief executive.
"Most of KiwiSaver's 380,000 subscribers are higher income people who went into KiwiSaver to get the huge government
taxpayer funded subsidies on offer.
"The transfer of wealth from the great majority of taxpayers to the minority, mostly higher income people who were
already saving without lower income taxpayers subsidizing them, will be in the order of $775m this year.
"Dr Cullen missed a great chance to get all employees saving by enrolling all taxpayers in the scheme and initially
funding their contributions from personal tax cuts.
"Factors undermining KiwiSaver include:
"1) Since KiwiSaver funds started being invested the NZX50 has fallen by over 8 per cent and most other international
share markets have also fallen, so most KiwiSaver accounts have lost money so far.
"But there is good historical evidence showing long term investments in equity markets generally rise over time, and the
scheme is all about saving for the longer term.
"Nonetheless we are concerned Kiwisavers may not be aware how their investment is doing and many new contributors may
not know much about equity markets and the things that influence the rise and fall of their investment.
"Its important therefore for the government to promote a business savvy society that is more fully aware financially.
"2. The IRD has not performed well and this is creating problems for employers, employees and fund managers as savers
lose confidence in the scheme wondering what happened to their money.
"The IRD takes a long time to transfer money sent to them by employers, and their employees are complaining that money
deducted, and contributed by the employer, is not showing up in their KiwiSaver accounts. Trust between employees and
employers is being harmed.
"IRD is also making mistakes by crediting people's savings to the wrong fund manager....one other than the nominated
one. Savers rightly worry their wrongly allocated money is not being paid interest, and there are consequences when some
funds appear to be doing better or worse than the one selected.
"3. KiwiSaver has created inequities in the workplace by causing discriminatory remuneration for those in the scheme vis
a vis the many who are not. Those in KiwiSaver may effectively get a 4 per cent pay rise to cover their entry while
those not in the scheme - the great majority - don't get it.
"We worked hard and successfully to get a mechanism to sort out this anomaly but it is left to employers to implement
the solution if they want to, or if they know how to.
"Government needs to fix KiwiSaver by simplifying it and achieving 100 per cent membership of employees by enrolling all
of them and channeling future personal tax cuts into their personal KiwiSaver accounts.
"Instead of taxpayers subsidizing the minority enrolled in KiwiSaver, everyone should receive a well overdue personal
tax cut paid into a compulsory KiwiSaver account, with additional employee contributions remaining voluntary.
"In the meantime those in KiwiSaver need to do their own research on which fund manager and investment strategy is best
for them.
"People have to take personal responsibility for this as the difference between a fund that does really well over the
longer term compared to one not doing so well is enormous, and amounts to hundreds of thousands of dollars."
ENDS