Michael Cullen would be turning in his grave if he knew about the National Party’s plan to let people dip into their KiwiSaver to pay for the bond on a flat.
Under a National-led government, anyone under-30 moving into a rental property will be able to do just that.
Apparently, the idea came from the Young Nationals and, according to National’s housing spokesperson Chris Bishop, they did quite a bit of consultation on it before deciding to run with it.
Which surprises me, given National touts itself as the party that knows all about money and what we should be doing with it, and spreads the gospel of compound interest.
Compound interest being that magic thing that allows us to make more the longer we keep our money in the bank or in an investment like KiwiSaver. And especially things like KiwiSaver, because not only do we put some of our own money in there - a lot of us get top ups from our employers and things like that, as well.
Which is why KiwiSaver is an absolute no-brainer. Especially for those lucky enough to have age on their side and who get a major head start on the road to retirement savings.
Unlike people like me - and maybe you too - who feel like we’re playing constant catch-up. Because there was no KiwiSaver when we started working and, while we might’ve had the option of getting involved in a superannuation scheme of some sort, a lot of us just didn’t because retirement was something that only “old people” had to think about.
So I look at my kids now and think they are very lucky that KiwiSaver exists and that, even while they were at school and while they’re at university doing part-time work, they’ve already had money going into their KiwiSaver accounts.
Which is why I think this idea of letting people use their KiwiSaver money to pay for the bond on a rental property is just stupid. Because the longer it stays there, the better-off a person is.
Yes, I can see why it made sense to loosen things a bit so that people could use their savings to help get a deposit together on a first home. Because, generally, buying property is a good investment. It’s not always - but, if gains are made, then you keep them.
And it’s not just the homeowner who benefits. If someone buys a place and does it up or adds-on a room, all the tradies and suppliers benefit too.
But the bond on a flat is just dead money. It goes into the Tenancy Services bank account and doesn’t come out until the tenant moves out.
And not necessarily all of it, either. Because, if you’ve been a tenant or if you’ve been a landlord, you will know that - if there’s damage that needs to be repaired - that’s paid for out of the bond.
So let’s say there is damage and the person doesn’t get all of their bond money back - not only have they missed out on the compound interest in their KiwiSaver account; they’ve also lost some of the money that was there in the first place because it’s gone on repairs to the carpet or the walls or whatever.
It’s been a while since I paid the bond on a rental property. It’d be more than 20 years, easily. And I know back then that it felt like a truckload of money to come up with. I checked earlier this morning and I see that a landlord these days can set a bond up to the equivalent of four weeks’ rent. So a lot of money.
But, as we did back then and as people do now, you find the money. It might be a loan from a family member or assistance from the government if you don’t have the means, and yes, it can be a real hurdle.
But I cannot accept that the best solution is to let people dip into their KiwiSaver. It’s a stupid idea. It’s shortsighted. And it flies completely in the face of what KiwiSaver was all about when it began 16 years ago, in July 2007.
Since then some changes have been made. There’s the ability for first-time home buyers to use their KiwiSaver money on a house deposit, that I’ve already mentioned.
There’s also the lesser-used option for KiwiSaver money to be used in cases of significant financial hardship. But, I’m afraid, I don’t consider a person who has to front-up with the bond on a rental property being in significant financial hardship. And I think it would be a very bad thing for tenants under-30 to be able to use their KiwiSaver money to get into a flat.
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