By Sam Stubbs. Originally published in The Post.

When it comes to encouraging Kiwis to save for their retirement, the National party does not have a stellar record. It goes all the way back to Rob Muldoon, who dismantled the fledging retirement savings scheme set up by the previous Labour Government. In perhaps the most effective political advertising of all time, Muldoon’s then-opposition party portrayed the scheme as communism, with a dancing Cossacks theme. 

Once elected, Muldoon’s Government then replaced Labour's voluntary contribution scheme with National Super - our universal superannuation benefit scheme that continues today. Ironically, the scheme was much more a socialist construct than the Labour savings scheme. But a retirement savings scheme, it was not.

Then Labour succeeded in getting a savings scheme to stick, with the Clark/Cullen government establishing KiwiSaver in 2007. But since then, successive National-led Governments have had a pretty dismal record of chipping away at it. They cut the $1,000 Kick Start payment, lowered contributions from 4% to 3%, and have twice lowered the member tax credit to what is now 25% of its original level. Why? Because not only was KiwiSaver a Labour initiative, but many in National thought it took money away from investing in Kiwis' favourite asset, investment property.

But KiwiSaver has to succeed, because it is becoming obvious that National Super, in its current form, is becoming unaffordable for New Zealand. Payments are now $25 billion a year, consuming almost 20% of all taxes. By 2060, the Treasury predicts it will rise to 27% of taxes. And all those extra billions on National Super payments mean less for schools, hospitals roads and police. Given this reality, eventually the age of retirement will have to rise and/or National Super payments will have to be reduced. 

So it is encouraging to see Nicola Willis saying she is considering raising the age of eligibility for National Super. This is an honest approach to a fiscal reality. And it is in contrast to past positioning by both political parties, who have continued to kick the can down the road. In the 2025 Budget, National’s approach to retirement affordability has further improved. By raising KiwiSaver contribution rates from 3% to 4%, the Government is effectively admitting that KiwiSaver is the best way to save for retirement. It’s a major admission of KiwiSaver's success, from the political party that hasn’t - until now - been a fan of the scheme.

But listening to many Budget commentators, you wouldn’t believe it. By focusing on the removal of KiwiSaver incentives - an easy target in an austerity budget - they missed the key point, i.e. that National is now a fan of KiwiSaver growing, too. And given it could be the biggest source of funding for the infrastructure we need, support for KiwiSaver from both sides of the house is a bouquet for New Zealand’s future prosperity. Bravo.

Let’s not forget, too, that the announcement to increase contribution rates would not have been without internal opposition. ACT still believes that people will act (pardon the pun) with knowledge and foresight when saving for their retirement. But there is plenty of evidence that this is not the case - just look at the rest of the developed world, nearly all of whom have compulsory or default retirement schemes. But ACT has an ideology, and it does not support what it would call nanny state compulsion. 

However, there was a brickbat in the budget too, because the Government has not gone the one step further that many - including myself - believe it should i.e. compulsory KiwiSaver. So why didn’t they? The logic goes that because we have universal National Super, we do not need to have either compulsory KiwiSaver, or contribution rates as high as Australia. And there is some truth to this. National Super puts a floor under old age poverty in New Zealand, and is something which defines us as a caring society.

But to continue to pretend that National Super will do the heavy lifting of keeping Kiwis comfortable in retirement is fiction. It will simply cost too much. And if KiwiSaver remains voluntary, the poorest in society will continue to opt out, only to be even poorer when they retire. They will then have nothing other than National Super, which is already not enough for most to live on. This is not the New Zealand we should want.

So, either way, the Government deserves a budget bouquet for - finally - acknowledging KiwiSaver as a path to long-term prosperity for all New Zealanders. They have effectively admitted that Labour were right to introduce it, and have, in a sense, now de-politicised its existence. With 3.5 million members and growing, KiwiSaver is now becoming too big to fail.

But a cross-party consensus on KiwiSaver is required, because we all deserve a predictable long-term environment in which to save. And KiwiSaver should be made compulsory, because those who aren’t saving now are the ones who will most need it. 

Nothing should be surer than death, taxes and, now thankfully, KiwiSaver.

The information provided and opinions expressed in this post are intended for general guidance only and not personalised to you. These materials do not take into account your particular financial situation or goals and are not financial advice or a recommendation. This post is not intended to convey any guarantees as to the future performance of any of the investment products, asset classes, or capital markets mentioned. Past performance is no guarantee of future performance. Information is current at the time of posting, and subject to change without notice. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit our website simplicity.kiwi.