A new report has criticised the “jokey” approach taken by the Retirement Commissioner in her review of retirement income policy last year.
Among Diane Maxwell’s recommendations were a call to increase the minimum KiwiSaver contribution, raise the pension age and require people to live in New Zealand for longer before they could claim state super.
But a new report from Michael Chamberlain, co-founder of KiwiSaver provider Superlife, and Michael Littlewood, co-founder of the Retirement Policy and Research Centre, said she had missed an opportunity.
“The findings were cloaked in a jokey, cartoon-like presentation on the website of the Commission for Financial Capability and amounted to 34 recommendations and observations with little to no supporting evidence for nearly all of them.”
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They said Maxwell seemed set on strengthening KiwiSaver, but had not asked whether the scheme was working.
Chamberlain and Littlewood said taxpayers had spent $8.5 billion on KiwiSaver tax breaks and another $740 million would be spent this year.
“Treasury reports before KiwiSaver started suggested that New Zealanders were probably slightly over-saving for retirement. Subsequent Treasury reports suggest that KiwiSaver hasn’t made much difference to households’ financial behaviour so why do taxpayers continue to spend large sums subsidising KiwiSaver?”
They said citing the number of members did not prove KiwiSaver was working.
They also called for the NZ Super Fund (NZSF), which was set up to invest to provide money to pay for the pension in future, should be disbanded, its assets sold and the proceeds used to pay off debt.
“It costs a lot to run, raises the risk profile of New Zealand Inc and it won’t, of itself, reduce the cost of NZS by $1. That’s because the cost of the NZS pension will be the benefits that are paid and those have nothing to do with the NZSF,” they said.
“The most the NZSF can achieve is a very minor smoothing of the incidence of the cost of NZS – more taxes today for a small possible reduction in tax-expenditure tomorrow. Over the next 100 years, the average annual drawdown will be less than one-tenth of the cost of NZS.”
They said investing while the Government had debt was the same as borrowing to invest, which would be politically unpalatable. Maxwell, by contrast, wants to see contributions to the fund resume.
But Maxwell defended both her review and the style in which it was conducted.
“The review had never been done this way before and there were stakeholders who initially struggled to understand what we were doing.
“The end result of the review, an online interactive portal, didn’t look like a report. In reality, it contained more data, analysis and submissions than previous reports but some stakeholders found the form challenging. Some resistance to the approach stemmed from the view that if the public became more informed it would undermine the role and status of those working in this space.”
She rejected Chamberlain and Littlewood’s suggestions.
“I do not believe it is a good use of taxpayers’ money to invest time and resource asking if KiwiSaver should exist. Over 2.7 million Kiwis have over $40 billion in funds under management. It’s here. We know we have an ageing population. It is possible, and even advisable, to prepare for the future. We ask it of our households and we need to do it as a country. The Super Fund should not be wound up, it should be supported. It plays a role in managing the future costs of super,” she said.
“Across 2016 we spoke to and heard from thousands of New Zealanders. That engagement made our work better and gave us a far deeper understanding of the issues. The alternative is to sit in a room looking at spreadsheets, talking to people just like ourselves and drawing theoretical conclusions. Those conclusions are invariably based on our own agenda and world view and result in a form of blinkered, if earnest, elitism.”