NEW ZEALAND - The National party has said it would invest 'at least' 40% of the KiwiSaver superannuation scheme's assets in the domestic market, in order to spur home economic growth.
Key said: "In the short term, in a world where money for investment is going to be more tightly held and more closely guarded, it will help ensure New Zealand has the investment capital we need to get out of recession and into a period of solid and sustainable growth.
"In the longer term it will give New Zealand businesses a greater opportunity to grow from a domestic base and grow under New Zealand ownership further than they would otherwise have been able to."
Another element of the National plan would allow the minister of finance to determine the level of investment in New Zealand, although the fund guardians would continue to exercise control over asset allocation.
However, the Labour party hit back, attacking the proposals as undermining the professional basis of the KiwiSaver's direction and management. It said many of the investments would not pass the fund's return requirements.
Current minister of finance, Michael Cullen said the Labour party was "totally opposed" to the proposals as the basis of the KiwiSaver's independence was "to ensure investment decisions are made by professionals".
He added: "Today's announcement […]shows that National has no respect for the independence of the fund nor any concern for ensuring strong returns on the fund to protect pay for superannuation into the future. Putting the fund at risk puts everyone's superannuation at risk."
Meanwhile, industry professionals have warned proposals by the National Party to eliminate employer tax credits for contributions and lower the employer contribution rate to KiwiSaver schemes will cause confusion and result in lower retirement savings,.
Finance spokesman Bill English last week announced that if the Nationals assumed government after the 8 November elections, the party would lower the minimum contribution rate for employees from 4% of gross salary to 2% and lower the minimum contribution rate for employers to 2% (globalpensions.com; 9 October 2008). The policy would also would eliminate the employer tax credit for making KiwiSaver contributions.
If implemented, the proposed policy would reduce incentives for employees to make more than the minimum 2% contribution, therefore reducing retirement savings, said Murray Sarelius, a partner at KPMG.
"I think some of the buy-in might be lost," he said. "Two plus two will accumulate more slowly than four plus four. There is also a question mark as to whether, at this rate, KiwiSaver will be enough for retirement. The sentiment seems to be that you'd have to be silly to contribute 8% if your employer is only contributing 2%."
The Nationals' proposal runs the risk of further confusing NZ employers, many of whom are still struggling to come to grips with operational features of KiwiSaver contributions, said Bernie O'Brien, head of Mercer New Zealand. Mercer Human Resource Consulting is one of six default providers, preselected by the government to receive automatic enrolments where members do not select a KiwiSaver provider.
"The vast majority of New Zealander businesses employ less than 10 people," he noted. "They don't have the resources to develop policies around these issues. One of the things we've seen in the first few months of KiwiSaver's launch is that there was a lot of non-compliance, simply because companies with all best intentions in the world don't know how to comply. There is a danger that these further proposed changes could sour the population's view of KiwiSaver if true, honest and innocent mistakes are made."
O'Brien noted that the Nationals had not proposed "substantial" changes to KiwiSaver. A Nationals-led government would keep the "kick-start" contribution of NZ$1,000 for each first time KiwiSaver enrolee, plus keep annual member tax credits that match contributions to a maximum of NZ$1,400, the party said in its policy paper. the fund at risk puts everyone's superannuation at risk."
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