National adopts 'soft compulsion' for KiwiSaver
National unleased its first shot of the election campaign this afternoon.
As widely expected, National is promising to enrol everyone not already signed up to KiwiSaver into the scheme. People would then have the option of opting out, within a certain period of time.
The promise is hedged with caveats: the most important being that the enrolment would only happen if the government’s books were on track to return to surplus.
Apart from the administrative costs, the government would also have to pay the $1000 “kick start” for everyone who opts to stay in the scheme, as well as the maximum of $520 a year in tax credits.
“Depending on the uptake and design, officials estimate a KiwiSaver auto-enrolment could cost the government up to $550 million over four years,” Finance Minister Bill English said when announcing the policy.
This assumes 55% of those who auto-enrol - 275,000 people - stay in the scheme.
“We intend to fund this from within existing budget allowances," Mr English said.
At present there are about 1.8 million KiwiSaver members, and the savings in the scheme are projected to rise from $8 billion this year to $25 billion by 2015 and almost $60 billion in 10 years.
“These measures are pushing in the same direction households are already moving,” Mr English says. “Having spent more than $1.10 for every dollar they earned three years ago, households will this year have a positive savings rate for the first time in more than a decade.”
Labour has yet to announce its savings policy but is examining full-blown compulsory savings.
National has ruled out compulsion on the grounds people should still have the choice to save in other ways if they wish to.
Labour considered making KiwiSaver compulsory during the last government but ruled it out on two grounds: one being that the less well off would be even worse off if forced to save; and secondly because it feared a compulsory scheme would eventually be used to cut the state-funded pension.