Compulsory KiwiSaver is a trap waiting to spring. That is the blunt message from a new analysis that lands as National promises to force every worker into the scheme if re-elected. The policy sounds like prudent retirement planning.
Look closer, and the risks stack high. The core problem: once the Government owns a pool of savings that people cannot escape, the temptation to interfere becomes almost irresistible.
Eric Crampton, the author of the analysis, names the fear directly. A future Government could decide your retirement savings are its capital to direct. Your money, your future, but the Government’s hand on the tiller.
Right now, savers have an exit door. Do not like where your KiwiSaver fund is going?
Opt out. Stop contributing when you change jobs. Your already-invested cash is vulnerable, but at least you can stanch the flow.
Compulsion removes that door entirely. You cannot leave. You cannot stop feeding the account.
That is a pool of money any finance minister would eye. The numbers make the power imbalance plain.
The Government chips in $260.72 a year. That is a small fraction of what most workers pay in. Yet with compulsion, that small contribution buys the state a permanent seat at the table.
Crampton argues savers should have the freedom to decline that $260.72 and the entanglements that come with it. The employer’s half of the contribution, he points out, comes out of your total compensation anyway.
It is your money, not a gift. Then there is the human cost. A low-income, part-time worker earning less now than they would get on NZ Superannuation would be forced to save in the years they can least afford it.
Someone borrowing to build a business might prefer to invest in that business, not a KiwiSaver share portfolio. Compulsion could push them to take on more debt just to make the payment. That is not prudent saving.
That is a financial straitjacket. The political logic is clear.
National wants the policy as a signature achievement. Compulsory saving sounds responsible. But the guardrails Crampton demands are missing.
Fix the fundamental problem before the change, he argues, not after. Once compulsion is law, the political incentives shift.
A Government that controls the flow of billions in retirement savings will find it hard to resist directing that flow toward its own priorities. Infrastructure. Housing.
Pet projects. Your retirement becomes a secondary concern. This is not a hypothetical.
Other countries have watched governments raid pension funds. The risk is baked into the structure.
A pool of savings that people can neither leave nor stop feeding is enormously tempting. The analysis warns that the case for compulsion is weaker than most people assume. That is a careful way of saying the policy is dangerous.
National has promised the change. The analysis does not name names or assign blame.
It simply lays out the arithmetic and the incentives. Low-income workers lose. Entrepreneurs lose.
Every saver loses the freedom to walk away. The only winner is a future Government with a captive pool of capital to spend. That is the direction the policy leads.
The question is whether anyone will put up guardrails before the door slams shut.
