I’ll start this post by stating that I am generally supportive of Kiwisaver as a scheme. I deeply regret the decision taken by the national government to remove the ‘carrot’ from the scheme and would much sooner have seen them scrap the bat-shit crazy interest free student loans rort to make their numbers.

So I am a little torn with the new Labour policy for compulsory Kiwisaver. I think there are a few things we can all agree on

1. It will suppress wage growth. DPF posts on that here including a Labour party admission of such.
2. Kiwisaver is a "low risk” or conservative investment. Even if you pick the Forsyth Barr build your own scheme and load up on equities you’ll still be buying bluechips and not speccy mining shares.
3. 9% of pre-tax income is a relative SHITLOAD of money for most people and would, I suspect, represent the entirety of investment income for  the 99% (post written about the time the smelly hippies were occupying Aotea Square)
4. Saving and investing (rather than spending) is a good thing and as a country we don’t really do enough of it
5. At 9% of pre-tax income Kiwisaver will impact the common kiwi savings vehicle of the family home. People will be slower at paying off their mortgages (yes even will all the mortgage diversion stuff)
6. Banks aren’t particularly interested in letting you gear against your Kiwisaver assets

So beyond all the usual stuff that’s been discussed today I have one really major concern with compulsory Kiwisaver

It’s going to knock the stuffing out of small business startup capital. Basically the money that many people would have put into a liquid investment such that they could draw down to start a business will instead be locked away in a conservative investment vehicle until they are 65. Now starting your own business is risky to be sure, but, are we really saying that someone on $80k in a solid job should be denied the opportunity to put their money aside to invest in their own venture?

What do others think?

People will point to the success of compulsory super at these kinds of pre-tax levels in Australia, but, the Australian scheme is quite different to Kiwisaver and in particular their Self Managed Super Funds provide some relief to the above concerns.

The argument about whether small business owners can bear the burden of these Kiwisaver payments is somewhat moot if they were never in a position to start their small business in the first place.