Labour is calling for a discussion about not allowing people to move their KiwiSaver savings out of the country, meaning KiwiSavers could only access their funds if they lived in New Zealand.
... "On the savings front, we’re going to have to consider whether we make our savings sticky, rather than having open borders - people being able to take their savings pool with them to Australia," [Labour Finance Spokesman David] Parker said.
...Currently, people moving overseas permanently from New Zealand can apply to have their KiwiSaver funds paid out to them, minus the government's tax credits. There is a minimum 12 month wait to get the money.I really need to see more detail on what Labour's here considering. Right now, those who have contributed to the New Zealand Superannuation Fund via their income tax payments are eligible to receive superannuation even if they live abroad. While the government could perhaps save a bit of money by cutting payments to Kiwis retiring abroad, there are more than a few problems. First, the countries where Kiwis retire might get annoyed by suddenly finding themselves with a bunch of destitute Kiwi elderly who were admitted on the understanding that they'd keep getting a NZ pension. Second, other elderly wouldn't choose to retire abroad; costs to the NZ health system would increase. Changing the default with enough forewarning wouldn't be unconscionable; it's just not that great a policy.
But if they're actually proposing that for KiwiSaver...oh boy.
Recall that KiwiSaver is a government scheme providing up to a $521 annual tax credit* for contributions to a designated retirement savings scheme. Employers make matching contributions into employees' KiwiSaver accounts, though we know by standard tax incidence theory that the statutory division between employer and employee contributions doesn't have huge effects on real incidence. The tax credits were meant as a nudge to get people into private retirement savings; Treasury found that KiwiSaver mostly displaces other savings. Folks have flipped a ton of their private personal retirement savings into these vehicles. If Labour's proposing expropriating them on exit, well, I'd really like Labour to make that explicit, campaign on it, and give me an option to pull everything out of KiwiSaver before they put it into effect.
I really hope that Labour's David Parker was misquoted.
UPDATE: Alex sends me the full transcript. Here's the relevant bit.
PAUL [Holmes] OK, ideas to stop it [out-migration to Australia].
DAVID [Parker] Capital gains tax, improved savings. You know, on the savings front, we’re gonna have to consider whether we make our savings sticky, rather than having open borders, people being able to take their savings pool with them to Australia. Someone suggested to me the other day - a senior business person - that we’re going to actually have to have a closed system that says once you get universal savings you actually can’t take them with you to Australia. We’ve got such a problem now between income differentials between New Zealand and Australia that we’re gonna have to do better. We’re actually also gonna have to move on inequality, Paul. You know, inequality in New Zealand is rising to atrocious levels, and a capital gains tax helps fix that as well.
So now I'm hoping this was just a silly off-the-cuff answer from an opposition Finance spokesperson rather than Labour policy. Labour's proposed making KiwiSaver compulsory; that, I think, is what Parker's referring to when he says "universal savings". Oh dear.
* Prior to 30 June 2012, the maximum tax credit was $1,043.
