Ministry of Commerce, David Clark Minister is reviewing some of the components of Kiwi Saver.
Lets hope if any significant changes are made, the public get a chance to comment, prior to any announcement. We don’t want repeats similar to National Party Policy announcements which usually announce changes to Retirement Income Policy , without consultation outside of their own party echo! (Bill English March 6, 2017) when he announced the age of entitlement to be progressively raised to 67. Also at that time Act leader David Seymour said English was “taking the proverbial” and that the distant deadline for a higher retirement age was “verging on satire”. The scheme was costing an extra $1 billion a year and the age needed to be raised immediately.
Such action and rhetoric reveal the approach and intentions of two of our major political parties, they need to remember Consumers don’t want a raise in the entitlement age to NZ Superannuation, it is neither required or necessary “New Zealand doesn’t need to increase the age of eligibility for New Zealand Superannuation and can afford to keep it at 65 for at least the next 30 years, a 2019 report by the Interim Retirement Commissioner says”.
NZ Superannuation policy is excellent, sustainable and there for future generations,. The choir should be ringing its praises. Halleluiah!
Back to Kiwi Saver and the 2022 Terms of reference for the Commissions review of Retirement Income.
The Letter below is from Minister David Clarke to the Retirement Commissioner , states what is intended, and also includes the terms of reference for the Commissions 2022 Review of Retirement income
COMMENT
Rob Stock a consistent writer on retirement income matters, published this piece, last month on Kiwi Saver
Labour review to consider removing $521 Govt KiwiSaver subsidy from employees
Rob Stock05:00, Feb 21 2022
David Clark, the Minister of Commerce and Consumer Affairs, has ordered officials to look into a ‘refresh’ of KiwiSaver. A Government review to “refresh” KiwiSaver could mean many workers miss out on $521 in their savings each year. It currently pays up to $521 annually to each KiwiSaver member who contributes at least $1042 to their accounts between July 1 and June each year.
If someone saves less than that, the credit is paid at a rate of 50c for every dollar saved. It means everyone who earns more than about $40,000 and contributes 3 per cent of their income qualifies for the full amount. But the review will consider whether it would be better for workers to only earn their government contribution when they make additional, voluntary, contributions to KiwiSaver.
David Clark, the Minister of Commerce and Consumer Affairs, told insurers at the Financial Services Council summit on Thursday, that he had ordered a review of KiwiSaver, but would not be drawn on the changes being considered. However, a public record already existed of what he had ordered Ministry of Business, Innovation and Employment (MBIE) officials to look into, and it included re-targeting “the government contribution to incentivise voluntary contributions to KiwiSaver by non-employees. “In a letter dated December 13, Clark told Retirement Commissioner Jane Wrightson that five ideas from her office’s 2019 review of retirement income policies would be considered in the review, including “tilting” the government incentive towards voluntary contributions, and away from employee contributions.
The commission, which Wrightson joined in 2020, said the government contribution was perceived as an entitlement by workers, rather than an Even if the government contribution was removed, most employees would still contribute to KiwiSaver to get their employer KiwiSaver contributions, it said. Instead, it would be better to only pay government contributions on voluntary contributions made by people into their KiwiSaver accounts.
That would mean ordinary workers would not earn government contributions on contributions deducted from their wages, but could earn them by making extra payments. That would encourage workers to save more, the commission suggested.
It said the re-targeting should be combined with making the government contribution more generous, which would encourage many self-employed people to start saving into KiwiSaver. We believe that the amount will need to be at least twice what the saver contributes,” it said. The commission suggested capping the size of government contribution each year at $2000, while containing the long-term cost by only paying it to savers for a limited number of years.
Clark said no decisions had been made on whether any changes would be made to KiwiSaver, but said: “It is around 14 years since KiwiSaver was introduced and so it is an appropriate time to review settings to ensure they are fit for purpose. “The aim of any changes would be to make New Zealanders better off, he said. The other four recommendations Clark has asked MBIE officials to consider in the review are:
Small Steps
The 2019 review suggested new KiwiSaver members be automatically defaulted into a “Small Steps” programme, with contributions rising by 0.5 per cent of their before-tax income each year. The current standard 3 per cent contribution rate was having the perverse effect of convincing people they were saving enough to pay for a decent retirement, the commission said. Under the small steps plan, after an employee had been contributing at 3 per cent for at least one year, their contribution rate would automatically increase until after 14 years they were saving 10 per cent of their incomes.
Remove age bans from KiwiSaver
Currently, employers do not have to make minimum 3 per cent matching contributions to KiwiSaver for workers under the age of 18, and over the age of 65. The commission suggested it was time to phase this policy out.
Ban ‘total remuneration’ packages
When hiring, employers can offer “total remuneration” packages, which effectively allow them to opt out of making employer KiwiSaver contributions. The commission wants this ended for all but senior management-level employees.
“Total remuneration can be appropriate in senior management roles, where the employee has far more bargaining power. But the practice is by no means limited to the higher levels of management,” the commission said.
Sidecar funds
The commission suggested creating KiwiSaver “sidecar” accounts to help people save emergency funds.
“We propose that the default creation of a side account to the main KiwiSaver account is explored by Government. This could be achieved through setting aside an extra 1 per cent employee contribution, so that every saver who chooses not to opt out has an ‘emergency fund’ of up to $3000 available, thus protecting their main savings while enabling access for shorter term needs,” the 2019 review report said.Once the $3000 is reached, contributions above that would then tip into the main KiwiSaver account,” the commission said.
Clark’s letter to Wrightson ruled out several suggestions to give women, and beneficiaries, more profitable KiwiSaver futures. The first was to enrol beneficiaries in KiwiSaver, and make payments for them.
The second was to pay “care credit” KiwiSaver contributions for people who take time out to raise children, or care for sick or disabled relatives miss out on KiwiSaver. The commission said in 2019: “We think this could make a significant difference for many New Zealanders, many of whom are women and also Māori and Pacific New Zealanders with significant family caring responsibilities, and who prioritise care for others over their own future wellbeing by foregoing income and employer contributions.”
But Clark told Wrightson: “The ongoing welfare overhaul, and work on the Ministry of Health’s funded family care arrangements, are already considering changes to policy settings for beneficiaries and for carers in the welfare and health systems. “For this reason, the Government does not propose to consider any changes to the application of KiwiSaver to beneficiaries, or the introduction of care credits, at this time.”