Retirement Commissioner Jane Wrightson is calling for KiwiSaver contribution rates to increase, saying balances are lower than expected after 18 years of the scheme, and individuals and employers need to put in more money.
She also wants to see employer contributions required for those aged over 65 and those under 18, and more help given to the over 65s ready to draw down on their funds.
Her calls come after a comprehensive analysis by Te Ara Ahunga Ora, the Retirement Commission, on the current settings for joining, contributing, and withdrawing from the KiwiSaver scheme.
Wrightson has made 15 recommendations for improvement, aimed at the government, KiwiSaver providers, employers, and the wider financial services industry.
She says the biggest opportunities lie in increasing contributions, as KiwiSaver balances are lower than expected across all age groups.
“I’d like to see a higher default contribution rate of at least four percent with employers matching at this level or more. We know that default rates are ‘sticky’ meaning people tend to stay with them,” she says.
For those who do not benefit from employer matching, such as the self-employed, Wrightson would like to see the government contribution increased.
Furthermore, she recommends extending government contributions for those on paid parental leave to include people who can’t continue to make their own contributions during this period.
“The reality is we all need to be saving more for our retirement but we know that it’s particularly challenging against the current backdrop of high inflation, and cost of living challenges.”
The Commission’s analysis shows that almost a quarter of those aged over 65 have KiwiSaver accounts. But Wrightson says the scheme may not be optimised to help people drawdown or ‘decumulate’ their assets. She wants to see KiwiSaver providers make improvements to help members navigate this drawdown phase.
However, the settings for joining KiwiSaver were working well, and there was no need to make the scheme compulsory, she says.
“When you consider the evidence, we already have high membership. Those not contributing are most likely not in paid work, on low incomes, or self-employed,” Wrightson says.
The pre-65 withdrawal settings were also working as intended with their relatively high bar. Only one percent of members, on average, have withdrawn funds for first home deposits and less than an average of 0.5 percent of members have made withdrawals for financial hardship reasons each year.
Wrightson is also keen to keep the requirement that limits membership to one KiwiSaver provider.
