Eric Crampton sees a trap door under compulsory KiwiSaver. The exit ramp vanishes the moment the Government makes saving mandatory. Today, you can walk away.
Change jobs, stop contributing. Opt out entirely.
Your money, your choice. Crampton, whose analysis landed Monday, says compulsion removes that escape hatch completely. A pool of savings that people can neither leave nor stop feeding, he warns, becomes enormously tempting to Governments.
The problem is not hypothetical. It is structural.
Once everyone is locked in, the Government controls the rules. The Government sets the contribution rate. The Government decides who manages the money — or whether it manages the money itself.
Crampton points out that a future Government might decide your savings are its pool of capital to direct. Your retirement, he argues, can be put at risk. National has promised compulsory KiwiSaver if re-elected.
Crampton says even those who favour compulsion should fix a fundamental problem first. Before the change happens, not after.
The fundamental problem is the Government’s own contribution. It is small. $260.72 a year. Tiny relative to what workers pay in over decades.
But that small sum gives the Government a claim. A foothold.
An argument that the savings pool is partly public and therefore subject to public direction. Crampton thinks you should have the freedom to decline that $260.72 and the ensuing entanglements. Keep your savings fully yours.
No government hook. There is a human cost to compulsion that gets lost in the policy debate. 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 rather than in a KiwiSaver share portfolio. Compulsion might push them to take on more debt simply to make the KiwiSaver payment.
The case for making KiwiSaver compulsory, Crampton concludes, is weaker than most people assume. He is not arguing against saving. He is arguing against giving the Government a captive pool of capital it can direct.
A pool that grows every payday. A pool with no exits.
The employer contribution is not free money either. Your employer’s half of the contribution comes out of your total compensation. It is your wage, redirected.
The Government’s $260.72 looks like a gift. It is a leash. Crampton’s analysis does not say compulsion is always wrong.
It says the guardrails must come first. The protections must be in place before the door locks.
Otherwise the Government gains control over private retirement savings — and your retirement is no longer fully yours. Only already-invested savings are at risk today. You can decide not to join KiwiSaver or to stop contributing when you next change jobs.
That is real protection. Compulsion removes it entirely.
The question is not whether people should save. The question is who controls the savings. Crampton’s answer is clear: you should.
Not a future Government that sees a pool of capital and thinks it knows best.
