Has KiwiSaver led to greater savings?

An interesting working paper by a couple of Treasury staff:

Results of the DiD analysis suggest the accumulation of net wealth by members of KiwiSaver was some $16,000 less than the comparable accumulation of non members.

Further, in an attempt to hold some of the other factors likely to affect net wealth accumulation constant, the DiD analysis was repeated by age, gender, education, income, wealth, partner and home ownership status. There was a positive effect in only five of the 28 cases examined. In three of these cases the estimated effect was small. In one case, however, the estimated effect was relatively large, at $20,000 in favour of KiwiSaver members. All other cases indicated KiwiSaver members’ accumulated less than nonmembers.

The DiD analysis only holds one factor constant at a time however. To address limitations of the DiD technique various fixed and random effect panel regression models are estimated in which changes in net wealth are related to many factors simultaneously. These include: KiwiSaver membership; income; net wealth; age; gender; partnership status; home and investment property ownership; ethnicity; if the respondent was born in New Zealand; education; labour force and health status. With four observations over time on assets and liabilities in SoFIE it is possible to measure three changes in net wealth for each of approximately 10,000 individuals. This provides nearly 30,000 observations for inclusion in each regression. 

The effect of KiwiSaver on net wealth accumulation is estimated to be negative in all model specifications examined, although the coefficient estimates are typically not statistically significant at conventional levels.

This is very significant. The evidence to date is that KiwiSaver has not increased the level of net wealth overall in NZ. It has merely transferred savings from one form of investment to another- but at a huge cost to the taxpayer in subsidies.

Labour say KiwiSaver must be compulsory, as if that magically will make everyone wealthier. It won’t. People are best left to make their own decisions about how to save.