Prime Minister Christopher Luxon told the recent FSC Outlook come to us with your five best ideas and let's see what we can do. So Good Returns asked some fund managers for their top five KiwiSaver change ideas.
KiwiSaver providers are united in their view that KiwiSaver should not be subject to political cycles.
John Berry, founder of Pathfinder, said a cross-party, long-term plan for retirement savings was top of his KiwiSaver wishlist.
“We’re lifting the savings rate from 3% plus 3% to 3.5% plus 3.5% to 4% plus 4%. If we want to get to where Australia are, which is 12% from the employer, that could be six plus six in New Zealand, but how are we going to do that?
“That should be something that's got cross-party support… a 10-year plan that is supported by everyone as a good idea for increasing savings over the long term.”
Pie Funds chief executive Ana-Marie Lockyer agreed. She said a long-term cross-party strategy was important. “KiwiSaver has enormous potential — both for improving retirement outcomes and for supporting productive long-term investment — but we need consistent policy settings to unlock that fully.”
Fisher Funds general manager of KiwiSaver David Boyle said there should be a planned runway of contribution increases that was clearly signalled to members well ahead of time.
“It’s not a surprise, they get comfort in advance… how we can see ongoing contributions increasing not just to 2028 but how do we get the further in a way that would allow both employers and employees to be able to plan ahead and take into account other business expenses. Having that really well signalled gives a lot of comfort for New Zealanders.”
Koura founder Rupert Carlyon said there should be more clarity on the purpose of KiwiSaver at government level, too.
“It feels as though KiwiSaver is all of a sudden seen as a free pot of money for everything and the government is happy to open up withdrawals as it is an easy and free win for them.
“It’s not a tool to build infrastructure, housing or buy farms. It’s a tool to fund people’s retirements.”
Morne Redgard, SBS Wealth chief executive, said the only way the country could make its superannuation system sustainable was by changing the KiwiSaver settings and putting individuals in a better financial position.
“That's not an easy, quick fix, but I think contributory rates is certainly part of that.
“And National have committed that if they come back into governance over the next six years or so, you know, they'll lift it to 6%, which again, I think would be a great thing. But it would be really good to see that timeline put in writing that people can work towards.”
Splitting contributions
Berry said he would also like to see members able to split their contributions.
He said the majority of Pathfinder members were women and the gap between male and female balances was significant.
That could be closed by allowing a couple to direct KiwiSaver as appropriate, he said. “If someone was off work to mind the children, their partner could direct their KiwiSaver contribution to both KiwiSavers, or just to their partner, if they wanted to.”
Total remuneration
Total remuneration packages have been a topic of discussion this year and many providers, as well as the Retirement Commissioner, have called for a ban.
Lockyer said this was something that needed to be attended to so that employer contributions were “truly additional”.
Chris Wilson, co-chief executive at Harbour Asset Management agreed that this was a problem. “Employers should not be able to include KiwiSaver contributions into total remuneration packages. Employer contributions should be on top of wages or salary, not lumped in so the employee ends up paying all of it.”
Redgard was also supportive of a change to the rules. “Contributions need to be over and above your income…some people aren't benefiting as much as some others. So it all depends what industry you're working in and what your employer is like."
"That just needs to be standardised, so the number that you get paid is the number that you get paid, and then your KiwiSaver contributions should be over and above that."
“I think that's more just about standardising the actual (language so that people can understand that. And it's just a standard across the industry.”
Compulsion
Lockyer said there should be a serious conversation about compulsion to lift participation and outcomes.
Boyle said it could work to make it compulsory for those who were turning 18 now, to get them into the habit early.
“It’s automatically enrolled, it’s compulsory and that’s your experience going forward. It might be a great way for the next generation to get used to it… for someone leaving school that’s the norm.
“A bigger conversation is do we take that any further but that could be a first step.”
Wilson said he wanted to see more New Zealanders in KiwiSaver.
“This would involve making it compulsory but also designing targeted measures to help the self-employed to fully participate and benefit.
“We see a lot of merit in the idea of kickstarting a KiwiSaver account from birth. Time is the ultimate builder of wealth, so a dollar saved from birth will deliver more for a member than one squirreled away at 18.
“Work needs to be done to look at whether the current government contributions approach remains fit for purpose or whether these might best be redirected to provide a head start to newborns. This would encourage greater financial capability for all New Zealanders as kids would be able to watch their balance grow over time with some real skin in the game.”
Redgard said the opt-out model was not delivering the best outcomes for some people, who might not realise the impact of decisions made earlier in their working lives.
“I think as people are coming into the workforce, liquidity is probably the tightest thing on a monthly basis. So if there is an opt-out, a lot of people just jump on that, because every dollar counts.
“Every dollar always counts but especially in the beginning phases, it’s probably an easy decision to make for some.
“I think we should take that option off. And because retirement, although most people, probably 90-odd percent of people don't think about that when they're 20 years old.
"And there's a lot of water to go under the bridge at that stage. So, you know, we should start looking after people at an earlier base.”
Incentives
Carlyon said there needed to be incentives to give people more of a reason to invest in KiwiSaver.
Most of the initial KiwiSaver incentives have disappeared, such as the member tax credit and $1000 kickstart payment. Carlyon said there was little on offer for investors to encourage them to tie up their money, compared to other countries that offered things such as tax breaks for retirement savings.
Carlyon said if any moves to compulsion were made without new incentives, people would just see it as a tax. “It can’t be done without incentives.”
Redgard said if KiwiSaver was to be made compulsory or contribution rates increased, people would need to see the benefit.
“Making the contributions tax free into the scheme will certainly take the sting out of making it compulsory and increasing those contributory rates. So I think that's something we certainly would like to see the government considering.
“I haven't done the numbers on that, and how is that going to impact the overall fiscal situation, because obviously, taxes feed superannuation. But I think those are some of the things we should certainly be looking at.”
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