KiwiSaver not all it's cracked up to be

The Herald reports that KiwiSaver could make a National Savings loss due to the tax breaks. It is estimated that between 9-19 percent of savings are new savings.

Of the $600 million in KiwiSaver, $300 million is from the Government, $240 million from savers and the rest is split between employers and admin costs. What is not clear is if the $240 million is new savings. Actually, it is clear, most of it probably isn't - as much as 80 percent, according to researchers. If the new savings estimate is closer to 9 percent, that's less than admistration costs, and the Government is pumping $300 million into Kiwi and employer pockets because Kiwis want to get tax breaks by saving $21 million extra, while doing nothing for the National Savings rate.

Some people are using KiwiSaver to reduce savings on other super schemes, others may reduce mortgage payments to get the tax breaks. If so, these people are paying more compounded interest on mortgages - so they are saving the same amount of money but spending more as well over the long run. But if the increased spending on compounded interest is more than the tax breaks, this means that the Government is not only effectively contributing to mortgage payments, you just can't get the money until later, and there is only one group that is better off: the banks.

Given that Cullen is more concerned with our National Savings rate than private savings, this reduction of National Savings should be of concern to him until November.