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last updated 29/07/2020

National Party suggests unemployed should access KiwiSaver funds to start up businesses

last updated 29/07/2020

29 July 2020 – A National Party plan to allow unemployed workers to access their KiwiSaver retirement fund to start a business has been criticised by a KiwiSaver provider

The proposed BusinessStart policy would allow any worker who loses or lost their job after March 1 to receive a $1000 voucher for financial advice, access to $20,000 of their KiwiSaver retirement funds, another $10,000 in GST or provisional tax credits, and the waiver of the $130 Company Office registration fee.

'One of the hardest things for starting up a new business is getting your hands on some capital, we figure it’s their money, why shouldn’t they be allowed to use it?' National Party leader (at the time of writing) Judith Collins, told Stuff.

But Rupert Carlyon, founder and managing director of KiwiSaver fund provider Kōura, said the proposed policy was a bad idea and ‘kind of scary’. ‘Using KiwiSaver to start a business was a high-risk proposition, due to chances of the business failing.’

While reliable statistics on business failure rates are hard to come by, it’s certainly true that the number of small businesses which don't survive their first five years is very high – estimates range between 50-66%, with businesses which have fewer than 5 employees being most at risk. That’s an appallingly high failure rate, especially when hard-earned retirement savings are at stake. The National Party has attempted to address this by allowing for start-ups to receive a $1000 voucher for financial advice from a Chartered Accountant or Registered Financial Advisor ­– a sum which won’t go a long way in evaluating any new business model.

By contrast, the failure rate for franchisees has been estimated at 10 percent or less over a three year period although, once again, reliable statistics are hard to find (see When numbers fail us). Given that franchises provide a known brand, proven business model, training, systems, support and a whole heap of other advantages, a higher success rate among franchises is to be expected. 

Judith Collins has so far provided no indication as to whether the policy would be applied to those taking up franchised businesses, although there seems no reason why it should not be.

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