Government accused of undermining confidence in KiwiSaver following tax U-turn

The Government is facing accusations of undermining confidence in KiwiSaver after yanking the handbrake for a massive tax U-turn yesterday.

And the fallout from the plan to wipe $103 billion from KiwiSaver funds continued to fall on the same day the Government gave $156 million to 1.3 million Kiwis.

Thursday marked cost of living cash day, so that means new records.

"This is great, you've gotta have this - thanks Jacinda," one person said.

Or just stocking up the pantry.

"Groceries probably, yeah definitely groceries," another said.

But there are no highs for Revenue Minister David Parker though, just the hangover of the KiwiSaver fees tax U-turn. 

"We faced a backlash that was so strong that we thought we should respond to it, so we made a hasty retreat."

KiwiSaver provider Dean Anderson said it was a "pretty major shift" in policy in 24 hours.

And he said it will have long-term impacts.

"The biggest concern we have is the erosion of confidence that will now occur for millions of Kiwis."

Finance Minister Grant Robertson said he didn't want to do anything to undermind KiwiSaver.

"It's a very important part of New Zealanders' retirement," he said. 

Prime Minister Jacinda Ardern was about as far away from it all as can be, in Kumara on the West Coast to expand the Mana Ake mental health programme.

Ardern asked school students what they thought a Prime Minister should know and learn to hold the top job.

"Paperwork," one student said. "Yes, there's so much paperwork," Ardern answered. 

Paperwork like advice on taxes. Inland Revenue (IRD) actually gave ministers another choice to even the tax playing field for providers and cut GST on fees altogether

That wouldn't dampen savers' returns but would cost taxpayers $22 million a year.

But IRD didn't recommend that option because "it seems unlikely" it would have a "material impact on the overall fees" that funds charge.

"Faced with a choice of removing tax or adding tax Labour did what it always did - they chose more tax," said National's deputy leader Nicola Willis. 

The Government dropping their GST tweak altogether.

"I'm very proud of KiwiSaver, Labour is very proud of KiwiSaver," said Robertson. 

So proud because Labour is KiwiSaver's maker and former Finance Minister Sir Michael Cullen its architect. 

"I think Michael Cullen would probably be appalled," Willis said. 

"What Michael Cullen would be appalled by is a party like National consistently undermining KiwiSaver while it was in office," Robertson replied. 

Like National suddenly axing the $1000 kickstart payment in 2015. Robertson, then in opposition, promised to bring it back, but New Zealand's still waiting.

"One day I would hope that would be possible but it would have to stack alongside the other priorities."

And Robertson likely hoped their tax flip flop hadn't happened too.