Latest news with #JaneWrightson
NZ Herald
26-05-2025
- Business
- NZ Herald
KiwiSaver: Cut-off for Government contribution nears – why funds could last 30% longer
The annual cut-off to receive the Government contribution is June 30. Despite the decrease in Government contributions, the Retirement Commission says most KiwiSaver funds should last 30% longer under new changes announced in Budget 2025. Those changes include minimum employee and employer KiwiSaver contributions moving from 3% to 3.5% from April 1 next year and then to 4% from April 1, 2028. This would offset decreases in the Government contribution. Analysis from the Retirement Commission found the contribution change should increase retirement savings for around 80% of contributing KiwiSaver members. For a 35-year-old on an average salary of $80,000, the change in contribution from 3% to 4% could result in a 25% higher KiwiSaver retirement balance at age 65. A 16-year-old earning $30,000, who is not currently contributing but intended to begin contributions at 18 pre-change, is modelled to have about 26% more in additional savings between 2025 and age 65, compared to 22% for a currently contributing 16-year-old. 'Our findings show that the increase of the default employee and employer contribution settings could result in retirement funds lasting on average approximately 30% longer than under the pre-Budget 2025 settings for median salary and wage earners who contribute without interruption over a 40-year working life,' said Retirement Commissioner Jane Wrightson. But for the about 200,000 members receiving only a Government contribution – including self-employed workers – the changes will result in a decrease in their KiwiSaver retirement savings balance, the analysis found. 'It's clear further work needs to be done to consider how we can better support the other 20% who are missing out on savings, which includes low-income earners, the self-employed and many women, Māori and Pacific peoples,' Wrightson said. The Retirement Commission said $1 billion was spent on the KiwiSaver government contribution last year. About two-thirds (2.2 million) of KiwiSaver members received a government contribution, with 77% of those receiving the full amount of $521.43. Finance Minister Nicola Willis told Ryan Bridge on Herald Now that the changes to KiwiSaver would provide people with 'a lot of financial security' and 'a much bigger nest egg'. Asked whether Kiwis would be worse off overall – by paying more now for our retirement later – Willis responded: 'I just don't accept that at all'. 'We are also doing other pro-growth, pro-wages policies including Investment Boost and other growth initiatives, so that overall we're confident that wages will keep growing,' Willis said.
1News
24-05-2025
- Business
- 1News
Who's worse off under new KiwiSaver changes?
An increase in contribution rates for KiwiSaver should make most savers better off - but it won't benefit everyone. As part of the Budget, the Government announced it was increasing the default KiwiSaver contribution rate to 4% from employees and 4% from employers. Over a saver's lifetime, including a first home withdrawal, it estimated this could make a high earner 28% better off at retirement and a low income or part-time worker 21% better off. But some people won't be better off at all. Retirement Commissioner Jane Wrightson said about 20% of KiwiSaver members would be worse off due to the Budget changes. The changes also included a reduction in the member tax credit to $260.72 (from $521.43 previously) when someone contributed at least $1042, and the removal of the credit entirely for people earning over $180,000. People who are paid on a "total remuneration" basis will not benefit when contribution rates increase. "Total remuneration" refers to the practice of employers offering a salary package, from which an employee can choose to make KiwiSaver contributions, rather than setting aside a separate contribution on top of an employee's salary. Some KiwiSaver providers, such as Kōura founder Rupert Carlyon, have expressed concern that more employers might shift to the total remuneration model, to avoid the higher rates. Wrightson said it would be important that did not happen. She has been calling for it to be banned for some time. Earlier Retirement Commission research showed just under half of employers used total remuneration for some employees. "It goes completely against the sprit of KiwiSaver whereby retirement savings are meant to be contributed by the employer, the employee and the Government contribution," Wrightson said. "That's the model. People will get no benefit from the changes on a total remuneration contract. This system needs to be changed so that total remuneration is abolished. "It's the old story - money in your hand versus money salted away. It becomes very tempting, so total remuneration was not permitted in the original KiwiSaver settings, it was changed a few years ago and I think it should change back." Wrightson said lower-income workers were more affected by the drop in the member tax credit because it was responsible for a greater portion of their retirement savings. She said, for people earning less than $30,000 a year, the member tax credit was expected to add up to 15% or 20% of their total balance at 65. With the reduction, it would be 6% to 11%. Wrightson said there was a divide forming between people who could afford to make KiwiSaver contributions at all and those who could not. Self-employed people do not have access to an employer contribution in many cases and many providers say it is common for them to opt to contribute only the $1042 required to get the member tax credit. In 2024, about 200,000 only received the government contribution, including 125,000 self-employed people, Wrightson said. She said the commission would conduct some more investigation into the impact of the changes on self-employed people and gig workers. "We're doing some work with Hnry to look at some of their data… We need to find out who's doing what, who's not doing what, where the gaps are and what the response by Government could be."
Scoop
24-05-2025
- Business
- Scoop
Budget 2025: Who's Worse Off Under New KiwiSaver Changes?
Article – RNZ The increase in contribution rates should make most savers better off – but it won't benefit everyone. , Money Correspondent An increase in contribution rates for KiwiSaver should make most savers better off – but it won't benefit everyone. As part of the Budget, the Government announced it was increasing the default KiwiSaver contribution rate to 4 percent from employees and 4 percent from employers. Over a saver's lifetime, including a first home withdrawal, it estimated this could make a high earner 28 percent better off at retirement and a low income or part-time worker 21 percent better off. But some people won't be better off at all. Retirement Commissioner Jane Wrightson said about 20 percent of KiwiSaver members would be worse off due to the Budget changes, The changes also included a reduction in the member tax credit to $260.72 (from $521.43 previously) when someone contributed at least $1042, and the removal of the credit entirely for people earning over $180,000. Total remuneration People who are paid on a 'total remuneration' basis will not benefit when contribution rates increase. 'Total remuneration' refers to the practice of employers offering a salary package, from which an employee can choose to make KiwiSaver contributions, rather than setting aside a separate contribution on top of an employee's salary. Some KiwiSaver providers, such as Kōura founder Rupert Carlyon, have expressed concern that more employers might shift to the total remuneration model, to avoid the higher rates. Wrightson said it would be important that did not happen. She has been calling for it to be banned for some time. Earlier Retirement Commission research showed just under half of employers used total remuneration for some employees. 'It goes completely against the sprit of KiwiSaver whereby retirement savings are meant to be contributed by the employer, the employee and the Government contribution,' Wrightson said. 'That's the model. People will get no benefit from the changes on a total remuneration contract. This system needs to be changed so that total remuneration is abolished. 'It's the old story – money in your hand versus money salted away. It becomes very tempting, so total remuneration was not permitted in the original KiwiSaver settings, it was changed a few years ago and I think it should change back.' Lower-income workers Wrightson said lower-income workers were more affected by the drop in the member tax credit because it was responsible for a greater portion of their retirement savings. She said, for people earning less than $30,000 a year, the member tax credit was expected to add up to 15 percent or 20 percent of their total balance at 65. With the reduction, it would be 6 percent to 11 percent. Wrightson said there was a divide forming between people who could afford to make KiwiSaver contributions at all and those who could not. Self-employed Self-employed people do not have access to an employer contribution in many cases and many providers say it is common for them to opt to contribute only the $1042 required to get the member tax credit. In 2024, about 200,000 only received the government contribution, including 125,000 self-employed people, Wrightson said. She said the commission would conduct some more investigation into the impact of the changes on self-employed people and gig workers. 'We're doing some work with Hnry to look at some of their data… We need to find out who's doing what, who's not doing what, where the gaps are and what the response by Government could be.'
Scoop
24-05-2025
- Business
- Scoop
Budget 2025: What Will KiwiSaver Changes Mean For Your Balance?
Article – RNZ Retirement Commissioner Jane Wrightson said low-income earners, Mori, women and self-employed people will be hit hardest by the changes. , Money Correspondent An increase in default KiwiSaver contribution rates announced in Thursday's Budget could leave KiwiSaver members more than $100,000 better off at retirement – but there is a warning that not everyone will benefit. As part of the Budget, a number of changes were announced to KiwiSaver. The government will halve the member tax credit available to people who contribute at least $1042 in a year to $260.72. When the scheme was first launched, the government provided a matching $1042. The cut is expected to save the government $400 million a year. Employer and government contributions will be made available to 16- and 17-year-olds. Previously, they had only applied to those aged 18 to 65. The default contribution rate for both employees and employers will increase in two stages to 4 percent from 1 April, 2028. Employees can opt to stay on the lower 3 percent rate, matched by their employer, but that will reset to the new default rate after 12 months. Impact of higher contributions KiwiSaver managers estimated that the increase to a default contribution rate of 4 percent, plus 4 percent for an employer, would make a material difference to KiwiSaver members' final outcomes. Murray Harris, head of KiwiSaver at Milford, calculated that someone who was 35, earning the average wage with a KiwiSaver balance of $25,000 in a balanced fund, could have an extra $56,000 (inflation adjusted) at 65. That would give them $50 a week more to spend, he said. At Sharesies, general manager of funds Matt Macpherson said without adjusting for inflation, the increase for a 30-year-old currently earning $75,000 a year with $30,000 saved in a growth fund would be $175,000 at 65. Harris said the increase would help to close the gap between what it cost to live in retirement and what NZ Super would provide. But he said it would have been good to see contributions extended to people over 65, as well as teenagers. Some KiwiSaver providers said the increase was not likely to be enough. Kōura founder Rupert Carlyon said 4 percent plus 4 percent was better than 3 percent plus 3 percent. 'But it's well short of six plus six, which would have brought us in line with Australia, and it's nowhere near the 15 percent OECD average pension contribution. We have a long way to go, but it's better than nowhere.' Dean Anderson, founder of Kernel Wealth, said the government should have followed Australia's lead and set a path detailing how contributions would increase over time. 'I don't know why we couldn't have gone further, with a long-term plan.' Carlyon said he was worried by stats showing that half of employers used a 'total remuneration' approach to KiwiSaver. This means that rather than providing a contribution on top of a person's salary, they are offered a total salary amount and the employee decides whether to contribute to KiwiSaver from that total. Carlyon said he was worried this would become more common as a way for employers to avoid the additional contribution. 'This is probably net positive for balances over time, but not for everyone – only a select group of people who have employers who do the right thing.' Reduction in member tax credit Macpherson said the impact of the smaller tax credit could compound out to $21,000 less for the 30-year-old earning $75,000 that he used as an example for the higher contribution calculation. He said some people were being left behind, 'in particular self-employed'. He said he saw many self-employed people contributing to Sharesies' scheme at the level to get the member tax credit – they would now have their returns reduced. Retirement Commissioner Jane Wrightson said low-income earners, Māori, women and self-employed people would be hit hardest by the reduction. 'It's a shame there are so few government incentives for a scheme that underpins private saving for retirement. I would at least have liked to see some of the savings from reducing government contributions be applied to serving those groups where we see the widest retirement savings gaps.' But other providers said the impact of the credit was not material for most KiwiSaver members. Anyone who was earning at least $50,000 a year and contributing 3 percent would have received the full payment. 'As much as I hate to see tweaking to KiwiSaver and removing incentives erodes confidence, when you're looking to find balance in the economy and make a saving, on a cost benefit basis, it's probably okay.'
Scoop
24-05-2025
- Business
- Scoop
Budget 2025: Who's Worse Off Under New KiwiSaver Changes?
, Money Correspondent An increase in contribution rates for KiwiSaver should make most savers better off - but it won't benefit everyone. As part of the Budget, the Government announced it was increasing the default KiwiSaver contribution rate to 4 percent from employees and 4 percent from employers. Over a saver's lifetime, including a first home withdrawal, it estimated this could make a high earner 28 percent better off at retirement and a low income or part-time worker 21 percent better off. But some people won't be better off at all. Retirement Commissioner Jane Wrightson said about 20 percent of KiwiSaver members would be worse off due to the Budget changes, The changes also included a reduction in the member tax credit to $260.72 (from $521.43 previously) when someone contributed at least $1042, and the removal of the credit entirely for people earning over $180,000. Total remuneration People who are paid on a "total remuneration" basis will not benefit when contribution rates increase. "Total remuneration" refers to the practice of employers offering a salary package, from which an employee can choose to make KiwiSaver contributions, rather than setting aside a separate contribution on top of an employee's salary. Some KiwiSaver providers, such as Kōura founder Rupert Carlyon, have expressed concern that more employers might shift to the total remuneration model, to avoid the higher rates. Wrightson said it would be important that did not happen. She has been calling for it to be banned for some time. Earlier Retirement Commission research showed just under half of employers used total remuneration for some employees. "It goes completely against the sprit of KiwiSaver whereby retirement savings are meant to be contributed by the employer, the employee and the Government contribution," Wrightson said. "That's the model. People will get no benefit from the changes on a total remuneration contract. This system needs to be changed so that total remuneration is abolished. "It's the old story - money in your hand versus money salted away. It becomes very tempting, so total remuneration was not permitted in the original KiwiSaver settings, it was changed a few years ago and I think it should change back." Lower-income workers Wrightson said lower-income workers were more affected by the drop in the member tax credit because it was responsible for a greater portion of their retirement savings. She said, for people earning less than $30,000 a year, the member tax credit was expected to add up to 15 percent or 20 percent of their total balance at 65. With the reduction, it would be 6 percent to 11 percent. Wrightson said there was a divide forming between people who could afford to make KiwiSaver contributions at all and those who could not. Self-employed Self-employed people do not have access to an employer contribution in many cases and many providers say it is common for them to opt to contribute only the $1042 required to get the member tax credit. In 2024, about 200,000 only received the government contribution, including 125,000 self-employed people, Wrightson said. She said the commission would conduct some more investigation into the impact of the changes on self-employed people and gig workers. "We're doing some work with Hnry to look at some of their data… We need to find out who's doing what, who's not doing what, where the gaps are and what the response by Government could be."
