Todays policy launched by National at the University of Auckland Clubs expo really highlights the vain approach they take to policy. You might be inclined to think this will help young people. You might even think to give them your vote. But the reality is that this policy will be extremely destructive in the long term. Trust me, we’ve run the numbers.

We’re all human, we make mistakes. Sometimes this means losing your bond due to damage or unpaid rent. That’s okay, that’s exactly what your bond is for. The risk of your bond coming from your Kiwisaver stems from incentive and compounding interest.

Most of us won’t look at our Kiwisaver until it’s time to buy a house, or retire. Until then, it only exists in the depths of our subconscious. The risk here is that the nature of Kiwisaver disincentivises you to ensure your bond is returned.

The Numbers

Let’s assume your bond doesn’t get returned. If you paid a Bond of $2000 (rough average for Auckland), with a High Growth Kiwisaver plan of 8.15%, you’ll be down $117,647.43 on potential interest when you go to cash out for retirement in 50 years.

If you’re lucky enough to survive 17 years of renting (18-35) without losing your bond, that’s still $7,992.41 you will be missing out on as a deposit on your first home, or to further contribute to retirement.

Why are retirement savings important?

Retirement may seem like a long way off for many of us, but we need to be saving now. I say this because across the developed world, including New Zealand, we have an aging population. This means that by the time we reach retirement age, so much of our Government’s budget will be going towards pensions, that future generations will have to face cuts to core services like healthcare and education.

We have a responsibility to build ourselves a sustainable economic future, we cannot follow past generations. We must save for our own retirement, not ask the Government for more when it’s too late.