KiwiSaver reforms on backburner but Retirement Commission looks ahead
The Retirement Commission (RC) has left KiwiSaver mostly alone in its latest triennial report… on government orders.
Jane Wrightson, Retirement Commission, says in the just-released statutory report on the sector that the now almost $90 billion savings regime was largely off-limits in the 2022 sector review.
“We have not been asked to focus as heavily on KiwiSaver for this review, given it was a strong feature of the 2019.
RRIP [Review of retirement income policies],” Wrightson says in the report. “Delays caused by COVID-19 meant we are waiting to hear back on the Government’s plans for addressing some of the recommendations that were made in the previous review.”
The Ministry of Business, Innovation and Employment (MBIE) is also understood to be amid a separate KiwiSaver review that may lead to policy changes down the track.
However, Wrightson says some of the 2019 RRIP recommendations might yet see the light of day.
“I am particularly hoping to see under-18 and post-65 employer matching contributions,” she says. “The Government could also consider additional incentives to further enhance KiwiSaver, such as reconsidering the minimum contribution level, and incentivising KiwiSaver for those groups with lower balances, or who do not receive an employer matching contribution (such as the selfemployed).”
But the 2022 RC report does include a couple of minor KiwiSaver formal recommendations including the introduction of policies to encourage ‘decumulation’ products and allowing temporary NZ visa-holders to join a scheme.
Furthermore, the RC report urges government to relax the minimum contribution rules to enable those on parental leave to still collect the annual member tax credit regardless.
The review also calls for rules mandating all KiwiSaver providers to report more detailed data to the Financial Markets Authority every year. As well, the RC review calls for an extension of the requirement to offer “timely information and guidance” to members nearing retirement from the current default-only schemes to all providers.
Among a number of suggestions to the financial services industry, the RC says: “KiwiSaver providers should recognise the post-65 use of KiwiSaver and ensure their products have been adapted for the decumulation (drawdown) phase, as well as in the accumulation phase. In particular, withdrawal forms should include guidance regarding regular withdrawals, and the overall guidance customers receive from their provider should be clear.”
“Employers could support staff, where financially able, to make voluntary contributions into their partner’s KiwiSaver during any periods of leave, to qualify for the government contribution,” the RC says.
In a separate report, a new industry thinktank (convened in partnership with the RC) has laid out six recommendations to boost savings habits of New Zealanders.
The ‘Encouraging savings’ paper published by the industry working group (chaired by former Westpac NZ chief, David McLean) includes support for a ‘sidecar’ fund system linked to KiwiSaver.
“Another recommendation was for banks, including CEOs, to meet at least once a year, to report on how they are using behavioural insights, research, and open banking systematically to incentivise positive financial behaviour for their customers,” a RC statement says. “The group recommend that if this doesn’t happen, the Government should step in to regulate it under the Conduct of Financial Institutions (CoFI).”
ACT PARTY
Hello Alec
On behalf of Brooke, thank you for taking the time to write to her on the topic of New Zealand Superannuation. Your email has also been shared with the ACT Party Associate Finance spokesperson, Damien Smith.
Thanks for getting in touch.
Kind regards
Ann McLean Correspondence Unit I ACT Caucus Support Centre
E: ann.mclean@parliament.govt.nzParliament Buildings | Wellington 6160 | New Zealand
From: Alec Waugh <alwaugh@xtra.co.nz>
Sent: Tuesday, 21 March 2023 1:27 PM
To: Brooke van Velden <Brooke.vanVelden@parliament.govt.nz>
Subject: NZ Superannuation
Hi
I heard recently from a close third party, that in response to a question on New Zealand Superannuation, you responded with New Zealand cannot afford the current costs.I would challenge that assumption, suggesting it lacks knowledge both on the History of NZ Super, comparative analysis with other OECD countries, and of course, ignores completely successful public policy and the fact no alternatives come close to achieving its outcomes.
Hope you will read my words below.
Regards Alec Waugh
Alec Waugh is the chairman of the Consumer organisation known as Kaspanz (Kiwi Saver, Annuities, New Zealand Superannuation Protection Association Incorporated). He has a Master of Public Policy and Bachelor Degree in New Zealand History. He retired as a Police Superintendent in 2006
TIME TO ACKNOWLEDGE NZ SUPERANNUATION IS GREAT PUBLIC POLICY, THERE FOR FUTURE GENERATIONS!
New Zealand leads the world with its twin model of NZ Superannuation and Kiwi Saver schemes. Recognised as the smart country by many offshore analysts in its approach to pension policy, New Zealand Superannuation current costs and future projections costs out to 2060 continue as one of the lowest in the OECD. As Susan St John and Clare Dale in their 2016 paper said “The projected NZS expenditure appears modest, especially if net rather than gross spending is counted, and when compared to current pension spending in other countries.”
Michael Little wood NZ foremost research commentator on NZ Super in a 2013 paper said “New Zealand Superannuation (NZS) is one of the simplest, most effective, and most cost-effective Tier 1 schemes in the developed world. We mess with it at our peril “Martin Hawes a respected NZ Commentator and author of numerous retirement income books said “NZ Super is a system so simple and cheap that we need to give people certainty and stop playing football with it
In 2022 Retirement Commissioner Jane Wrightson announced
“It is clear to me that the age of eligibility to access NZ Super must remain the same, or a more complicated system be considered to reduce the inevitable inequity such a change would bring. Any increase to the age of people accessing NZ Super will only further disadvantage women, Māori, and Pacific People. “Retired New Zealanders make valuable contributions to their communities – with NZ Super providing the means to give back through unpaid work, voluntary work and caregiving.”
Today, 40% of people aged 65 and over have virtually no other income besides NZ Super and another 20% only have that, a little more. Even with NZ Super, close to one in three people do not think they will have enough for retirement unless they continue working past 65.Why then the proposal by the National and Act Parties to change the age of eligibility from 65 years to 67 years?
Part of the answer is a lack of knowledge on the topic with inaccurate perceptions abounding. Brooke Van Velden the Act party deputy leader, recently stated, “we cannot afford the current NZ Superannuation scheme. Noting the earlier comments at the commencement of this paper, she needs to remember NZ has one of the simplest and cost-effective schemes in the developed world, with no expensive and complex admin or tax . We need to invest more in Retirement Income research and policy. Only Auckland University has a small dedicated Pensions and Intergenerational Equity Research hub, the New Zealand Academic world needs to awaken to the Retirement Income world.
Another complexity is the perception that longevity is increasing. That has been the case, but current research is appearing that this is no longer occurring, and the real issue is individual quality of life in senior years. People may live a couple more years, but it is the illness and injuries and inability to work that is the real issue, reinforcing the need for pensions and senior years protection. Economists have not helped with their crisis rhetoric and superficial comments. Developing social and public policy is not the expertise of economists , and their assumptions and long-term projections are often flawed.
Further, the lack of comparative overseas research and information is often missing from the debate.
A range of New Zealand male right- wing commentators’ compound both the facts and perceptions. These include e.g. John Roughan. Matthew Hooten, Mike Hosking, Cameron Bagrie who all make comments which sound profound at first glance, but simply do not cut it upon subsequent examination. The voices of calm reason and substantial evidence flow from Michael Littlewood, Roger Hunard and Mary Holm; while Diana Clements and Carmel Fisher also offer balanced views.
Judgement calls hopefully rest upon thoughtful and careful assessment of many issues. Be wary of those calling for policy change from just one perspective. The reality is no other alternative model of Superannuation outside of the current set up exists, a model which has assisted women and kept the elderly from poverty for generations. When you add in the fact that with retirement income issues there has not been a task force since 1991, and political parties have no accord between each other on retirement income policy, the potential for poor decisions is profound.
A buffer against poor policy decisions, would be a NZ Retirement income summit, the last held was 1991. Ensuring the Retirement Commission is the Centre of Excellence and Knowledge on Retirement Income policy and research, with strong international comparative analysis, would be useful.
What we do know is that over 40% of New Zealanders 65 years and over relies on our superannuation as their sole means of income. This statistic has remained basically unchanged for a long time and will continue to be a future trend. Kiwi Saver savings are not substantial enough to make a lot difference, and savings schemes never apply to the low paid. The intergeneration tensions are a red herring; history shows many looks back with rose tinted glasses and those looking forward often predict doom and gloom. Every generation adjusts to the challenges faced, but the research on the topic indicates it all evens out.
A rising problem for those in the 40-60 years group is they are on the retirement income treadmill, continually being pulled in multiple directions, saving plans in reverse, as they financially support adult children, and looking after frail parents. Pre-occupied by others needs is the trend for this group, their own retirement savings eroded.
This group is aptly called the “sandwich generation”. Work-place pension’s schemes have diminished rapidly over the last 25 years, and defined contribution schemes like Kiwi Saver have camouflaged retirement income gaps. Research suggests that providing child care for those less than 5 years old, is now the dominant responsibility of grandparents.
They are also coping with their children not departing the family home and becoming independent, but staying longer (nesting) and an emerging trend of children having experienced study and work experience, returning to the family home in their later years, seeking cheaper living costs. Parental hospitality, parental loans/guarantees to their children are everywhere.
Today’s reality for many parents is they are supporting their siblings financially, detrimentally affecting their own retirement nest eggs. Its imperative parents ensure their own retirement income needs come first, hence the necessity to continue with the current model and any rising of the age entitlement of NZ Super signaled decades in advance.
Great Policy: A very good scheme