The Rationale and Implications of the New Zealand KiwiSaver
Author: Sue Yong, Auckland University of Technology
Abstract: The KiwiSaver saving scheme became operational in New Zealand from 1 July 2007, two years after the Labour-led government announced its intention in the 2005 Budget. The rationale for the scheme is to help New Zealanders prepare for their retirement and to address the concerns of increasing consumption and declining household savings. Foreign capital was the main reason for increased consumption resulting in growing current account deficits. The KiwiSaver scheme has many implications for key stakeholders such as employers, employees, taxpayers, government and the investment providers. Not all stakeholders will benefit financially from the scheme, as some will incur considerable costs. Both employees and investment providers will benefit financially from the scheme at the expense of taxpayers and employers who are financing the scheme. Employees who joined the scheme will gain from the financial incentives provided. A larger pool of funds from the KiwiSaver savings will benefit investment providers and the financial market. On the other hand, the implementation of the scheme will cost taxpayers and employers substantially over the next few years. Employers can also expect increased administration and compliance costs with the KiwiSaver scheme.