The government's decision to cut the $1000 kickstart from KiwiSaver has been met with dismay by some young people, worried about funding their retirement.
Sascha Zerjal and Sam Dickinson. Photo: RNZ / Michael Cropp
Opponents say kicking the kickstart has removed a key incentive that encouraged many people to sign up to the scheme.
New Zealand's first pension scheme was introduced in 1898 for 'persons of good character' older than 65. It was means tested and income tested - but the take up rate was low, probably because life expectancy was even lower.
The old-age pension evolved, and in 1977 Robert Muldoon's National government established the universal super for 60-year-olds, which was paid at 80 percent of the average wage for a married couple.
Now, the payment is at 66 percent, and the age of eligibility is 65, which is where the Prime Minister John Key, along with the Labour party leader Andrew Little, has pledged it will stay.
Because of that, members of Generation 'Y' (born in the 1980s and 90s) do not think universal superannuation will still be around when they want to retire.
"We'll have KiwiSaver, I imagine they'll have gotten rid of superannuation by then. Or at least cut it back so much that it's not worth it, or have really strict criteria for it," said Sascha Zerjal, a 6th year law and commerce student.
She believed she would have to save for her own retirement, so cutting the $1000 kickstart would do little to deter young people from joining KiwiSaver.
"I think people will still sign up, they're just being slightly more ripped off; but yeah, they'll still sign up."
Her classmate, Sam Dickinson, said people would continue to sign up by virtue of their employer.
He said in the long run $1000 would not equate to much, "the amount of money you're going to get from that $1,000, the actual real value of that in 40 years by the time we [retire] actually isn't going to be that much".
Even Lydia Steel, who had not signed up when the boost was available was not too bothered.
She said she would still sign up for the scheme.
But the Labour leader Andrew Little said it would make KiwiSaver less attractive.
"I know from my previous work experience that for a lot of working people, particularly those on lower incomes, it was the $1,000 kickstart that got them over the line," he said. "I think it will have an impact, in terms of getting people voluntarily signing up, because the incentive is no longer there."
Labour leader Andrew Little Photo: RNZ / Alexander Robertson
Despite ruling out means testing, and raising the age of entitlement, Mr Little said the government had to take action to address the future sustainability of superannuation.
"We need to resume contributions to the New Zealand Superfund, that's the priority issue and frankly right now it's the only issue," he said. "It's the responsibility of this government to make sure that happens."
According to Treasury, resuming contributions to the $29 billion fund straight away would make it $17 billion bigger by 2029/30, meaning it could start subsidising the government's superannuation bill two years earlier at a higher rate.
But the government has said it would only contribute to the Superfund when public debt was below 20 percent of Gross Domestic Product, which was projected for the year 2020/21.
Financial columnist Mary Holm said the outlook for Super was not all that gloomy.
But she said that to be comfortable in retirement, forward planning was essential - and KiwiSaver was a great way to do that.
"It's actually almost impossible to beat it. If you don't go into KiwiSaver, and you're trying to do just as well with rental property or direct investment in shares or something like that, it's very unlikely you'll get the same level of return for the same level of risk," she said.
And with the kickstart gone, the retirement commissioner Diane Maxwell said the door was now open "to an earlier date for auto enrolment, which would be a positive move."