Latest news with #KirkHope
Scoop
4 days ago
- Business
- Scoop
KiwiSaver Providers Hope Public Support For Contribution Increases Will See Default Rates Move Higher
KiwiSaver providers are hoping public support for increased contribution rates could provide the incentive to push them still higher. The latest RNZ-Reid Research poll included questions about the changes to the KiwiSaver scheme announced in the Budget. From 1 April next year, the default contribution rate for employers and employees will rise to 3.5 percent. The following April, it will be 4 percent. But the government will halve the credit it offers to people who contribute at least $1042 a year to their KiwiSaver, to a maximum $260.72. It will not be available to people earning more than $180,000. The poll showed a total of 61.2 percent of respondents supported the contribution change, 21.4 percent opposed it and 17.4 percent were not sure. Among National voters, almost 80 percent supported the change. But only 23.7 percent of total voters supported the government's move to halve the contribution rate, and fewer than half of National supporters. Fisher Funds chief investment officer Ashley Gardyne said he was not surprised by the findings. He said we should not stop at 4 percent plus 4 percent, and should push towards higher contribution rates. "I think it's really positive we've seen the contribution rates increase, and ultimately if we want people to get to the right amount of savings in retirement those rates do need to move up through time." He said the Australian model, where contribution rates slowly lifted over a number of years, could be one to follow. "They took a really long-term, 10-year approach of increasing contributions by a little bit every year. The reality is it's tough to find extra money in your pay cheque to put into KiwiSaver but it is really important long-term as well to make sure you end up in the right position for retirement. "Having a long-term vision like that is really important." Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, agreed the results were expected. "We've known for some time that in terms of contributions those will be relatively well received. Obviously it's a bit tougher if the government contribution is being halved or in some cases removed that's not going to be particularly popular, the key thing is the government continues to contribute something." He said there should be a bipartisan agreement about a long-term strategy for retirement income. He said it was also worth discussing other steps the government could take, such as adjusting the tax settings. "Other changes the government might be able to make to the tax system in the future to continue to incentivise particularly savings and even up the playing field between savings and investment and housing. That's some fundamental shifts in the tax system." More incentives needed Ana-Marie Lockyer, chief executive at Pie Funds, said it was good to see that most people supported the contribution increase. "In terms of the halving of the government contributions we need to acknowledge the government faced some hard choices as a result of the tight fiscal environment. But I believe we should be offering more incentives for Kiwis to save for their retirement, not fewer. "Reducing the government contribution is more likely to impact the retirement balances of lower income earners - a group who deserve the same opportunities as everyone else." She said even a reduced contribution of $261 a year could grow to more than $40,000 over a person's working life. "I think what's more important than the dollar amount of the government contribution is the number of Kiwis who don't receive it, either because they're not eligible or they're not contributing enough. "While it's a good thing that the government contributions are now available for 16- and 17-year-olds, I think the government missed a trick by not extending it to the increasing number of over-65s who are still working, whether by choice or necessity. "What's probably more concerning is the thousands of KiwiSavers missing out on the MTC government contribution each year because they're not contributing enough to qualify, leaving millions of dollars on the table. "So the poll is actually a timely reminder for people to ensure they've contributed at least $1043 by 30 June in order to receive the full government contribution of $521 - before it reduces to $261 next year." A spokesperson for Finance Minister Nicola Willis said the changes to KiwiSaver were designed to help Kiwis to save more and make the scheme more fiscally sustainable. "For example, an 18-year-old earning the minimum wage of just under $49,000 a year who invests in a balanced fund can expect to have almost $910,000 in KiwiSaver at age 65. Under the old settings it would have been about $732,000. "The results are similar for most other people. The Retirement Commissioner estimates the changes will increase retirement savings for about 80 percent of KiwiSaver members."
RNZ News
5 days ago
- Business
- RNZ News
KiwiSaver providers hope public support for contribution increases will see default rates move higher
Financial Services Council chief executive Kirk Hope. Photo: RNZ/ Dan Cook KiwiSaver providers are hoping public support for increased contribution rates could provide the incentive to push them still higher. The latest RNZ-Reid Research poll included questions about the changes to the KiwiSaver scheme announced in the Budget. From 1 April next year, the default contribution rate for employers and employees will rise to 3.5 percent. The following April, it will be 4 percent. But the government will halve the credit it offers to people who contribute at least $1042 a year to their KiwiSaver, to a maximum $260.72. It will not be available to people earning more than $180,000. The poll showed a total of 61.2 percent of respondents supported the contribution change, 21.4 percent opposed it and 17.4 percent were not sure. Among National voters, almost 80 percent supported the change. But only 23.7 percent of total voters supported the move to halve the contribution rate, and fewer than half of National supporters. Fisher Funds chief investment officer Ashley Gardyne said he was not surprised by the findings. He said we should not stop at 4 percent plus 4 percent, and should push towards higher contribution rates. "I think it's really positive we've seen the contribution rates increase, and ultimately if we want people to get to the right amount of savings in retirement those rates do need to move up through time." He said the Australian model, where contribution rates slowly lifted over a number of years, could be one to follow. "They took a really long-term, 10-year approach of increasing contributions by a little bit every year. The reality is it's tough to find extra money in your pay cheque to put into KiwiSaver but it is really important long-term as well to make sure you end up in the right position for retirement. "Having a long-term vision like that is really important." Read more: Australia soon to be second in world for retirement savings as superannuation pool soars Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, agreed the results were expected. "We've known for some time that in terms of contributions those will be relatively well received. Obviously it's a bit tougher if the government contribution is being halved or in some cases removed that's not going to be particularly popular, the key thing is the government continues to contribute something." He said there should be a bipartisan agreement about a long-term strategy for retirement income. He said it was also worth discussing other steps the government could take, such as adjusting the tax settings. "Other changes the government might be able to make to the tax system in the future to continue to incentivise particularly savings and even up the playing field between savings and investment and housing. That's some fundamental shifts in the tax system." Ana-Marie Lockyer, chief executive at Pie Funds, said it was good to see that most people supported the contribution increase. "In terms of the halving of the government contributions we need to acknowledge the government faced some hard choices as a result of the tight fiscal environment. But I believe we should be offering more incentives for Kiwis to save for their retirement, not fewer. "Reducing the government contribution is more likely to impact the retirement balances of lower income earners - a group who deserve the same opportunities as everyone else." She said even a reduced contribution of $261 a year could grow to more than $40,000 over a person's working life. "I think what's more important than the dollar amount of the government contribution is the number of Kiwis who don't receive it, either because they're not eligible or they're not contributing enough. "While it's a good thing that the government contributions are now available for 16- and 17-year-olds, I think the government missed a trick by not extending it to the increasing number of over-65s who are still working, whether by choice or necessity. "What's probably more concerning is the thousands of KiwiSavers missing out on the MTC government contribution each year because they're not contributing enough to qualify, leaving millions of dollars on the table. "So the poll is actually a timely reminder for people to ensure they've contributed at least $1043 by 30 June in order to receive the full government contribution of $521 - before it reduces to $261 next year." Finance Minister Nicola Willis says the changes will help Kiwis save more. Photo: RNZ / Mark Papalii A spokesperson for Finance Minister Nicola Willis said the changes to KiwiSaver were designed to help Kiwis to save more and make the scheme more fiscally sustainable. "For example, an 18-year-old earning the minimum wage of just under $49,000 a year who invests in a balanced fund can expect to have almost $910,000 in KiwiSaver at age 65. Under the old settings it would have been about $732,000. "The results are similar for most other people. The Retirement Commissioner estimates the changes will increase retirement savings for about 80 percent of KiwiSaver members." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
7 days ago
- Business
- RNZ News
Call to rethink tax on KiwiSaver
Photo: RNZ KiwiSaver members could be significantly better off if New Zealand adopted a taxation model similar to Australia's, an economist says. Simplicity chief economist Shamubeel Eaqub ran some numbers modelling a system similar to Australia's, where contributions and returns are taxed at 15 percent. In New Zealand, full tax is paid on income contributed to KiwiSaver, and returns in PIE schemes taxed at an investor's prescribed investor rate up to 28 percent. Eaqub said an "average" KiwiSaver investor starting now could end up $60,000 better off in nominal terms at retirement on a model similar to Australia's. If tax was not paid on contributions or returns, they could be about $1 million better off - and if only taxes on returns were removed the gain would be about $300,000. "In Australia, the context is there's some conversation about whether the tax breaks are too generous for richer people. It's not that it's perfect but the point is in other countries it's heavily incentivised for people to save in their private pension." But it was not in New Zealand. Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, said the Australian model was different because that country has a means-tested pension. "The tax break that occurs in New Zealand occurs when you retire, when you get national super.. that is the equivalent of about $500,000. So I think it's hard to do a comparative analysis without acknowledging that there are significant differences between the schemes and what they are trying to achieve." But he said if the tax on savings for New Zealanders was reduced it would give future governments more "fiscal options" in relation to superannuation. He said New Zealand previously had a system that was EET - or exempt, exempt, taxed, where contributions were tax-exempt, exempt from tax within the scheme and then fully taxed when withdrawn. The Tax Working Group in 2018 acknowledged that the change from that system had potentially created incentives for New Zealanders to direct savings into investments like houses instead. Hope said it would be expensive to adjust back to EET but there could be other changes that would be more affordable. The tax working group estimated that ignoring behavioural changes, it would cost $200m to $300m a year to move to a system where returns and withdrawals were not taxed, and $2.5b a year to move to an EET system. "The higher initial cost for an EET regime arises from the fact that there will be a substantial deferral period before significant amounts are withdrawn from the scheme, and thus taxed under the third 't'. Although these are very different initial costs, the costs will be the same in the long run on a net present value basis." Hope said providing different forms of tax incentives would be beneficial for savers. He said removing or reducing the employer contribution tax would be particularly useful for low-income people. Kernel Wealth founder Dean Anderson said New Zealand was one of the few countries operating a TTE - taxed contributions, taxed returns and exempt withdrawal - model. "Our future savings would be much better off under an EET approach, where we don't pay tax on the way in but on the way out. "With low savings rates in NZ, the government should be exploring everything in its powers to grow savings rates, which benefits NZ and Kiwis over the long term. "But it's not a surprise. The recent meek KiwiSaver policy announcement did all the hard work to announce a positive gradual increase to KiwiSaver contributions, yet they fell short by announcing a three-year policy rather than outlining a decade plus long policy of incremental KiwiSaver increases." Ana-Marie Lockyer, chief executive at Pie Funds, said KiwiSaver members were at a disadvantage compared to Australians because there was no upfront tax incentive or concession as in Australia to encourage them to contribute more. "Maybe consideration of a mid-tier flat tax rate on savings up to a certain amount would encourage savings." She said employer contributions were also taxed so investors lost the benefits of compounding, and investors paid tax on bonds and deemed dividends on global equities so they were effectively paying a capital gains tax. "So contrary to the government's stated goal of helping New Zealanders' grow their KiwiSaver balances, these factors mean New Zealanders have less incentives to make voluntary contributions and pay more tax on investment earnings, resulting in smaller balances at retirement relative to our Australian friends." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
NZ Herald
29-04-2025
- Business
- NZ Herald
More than half of Kiwis worry about money weekly as financial pressures remain
'These results show that while there's potential for optimism, many households are still feeling the pinch,' said FSC chief executive Kirk Hope. 'The data reflects that financial pressure hasn't disappeared.' Financial issues also had an impact on the wellbeing of those surveyed, with 59% reporting their mental health had been affected. Younger generations remain the groups that worry about money more regularly, with 35% of Gen Z worrying about it daily compared with Gen Y (30%), Gen X (31%), and Baby Boomers (16%). Job security dropped, with 80% reportedly feeling either completely, very or reasonably secure in their current employment, down from 85% in 2024. 'Job security remains high but there is a small downward trend,' the report said. Only 44% of New Zealanders said they feel financially prepared for retirement, down 6% from last year. 'At present, fewer than half of Kiwis feel financially prepared for retirement – a phase of life that should be defined by security and peace of mind,' Hope said. KiwiSaver remains the top investment New Zealanders have, with 81% of Kiwis enrolled – more than double the 40% who hold cash investments like term deposits. 'With KiwiSaver being the primary investment vehicle for most New Zealanders, it's essential that we re-examine settings around contributions and enrolment,' Hope said. 'Ensuring people can maximise the benefits of KiwiSaver is critical not just for their retirement, but for the long-term financial wellbeing of the country.' A recent BNZ Voice survey found squeezed households were resorting to high-interest credit fixes to juggle back-to-school and work costs. More than a third (37%) said they were turning to high-interest lending such as buy now, pay later services and credit cards to cover costs. The biggest start-of-year expenses were stationery (53%), transport (42%), school and work uniforms (42%) and technology-related costs (40%). Meanwhile, financial hardships in February were 16% higher year on year compared with a year ago, according to Centrix data.
RNZ News
28-04-2025
- Business
- RNZ News
Are you a 'have' or a 'have-not? What the numbers say
Photo: RNZ About 15 percent of New Zealanders have at least $500,000 in household investments, but half of us are worrying at least weekly about our money, new data shows. The Financial Services Council (FSC) - which represents KiwiSaver providers and life insurers - has released research that shows overall, New Zealanders' financial situations have worsened year-on-year. It found 20 percent of people did not feel secure in their employment, up from 15 percent a year earlier and 11 percent in 2023. There was a particularly noticeable increase in job insecurity for those aged up to 29 - last year only 10 percent worried sometimes or always about their job security, but this year it was 21 percent. The number of people with investments dropped, and there was a 6 percent decrease in those reporting that they were very or reasonably prepared for retirement. About a third of respondents said their household investments were worth $50,000 or less. A third also said they could only keep up their current lifestyle for less than a month if they were not earning an income. More than a quarter said they worried about money daily. But at the other end of the spectrum, 15 percent said they had household investments - not including direct investment in property - of at least $500,000, and 6 percent said they had more than $1 million. FSC chief executive Kirk Hope said the divide was a concern. "It highlights the importance of maintaining a concerted focus on encouraging New Zealanders to build their savings. The ultimate goal is to ensure that everyone has the opportunity to enjoy a dignified and financially secure retirement." Just over 80 percent of respondents had KiwiSaver, roughly double the number who had cash investments, including term deposits. Just under a quarter had investments in New Zealand shares, 17 percent invested in other managed funds, 18 percent in direct property, 17 percent in international shares, 11 percent in exchange-traded funds and 7 percent in collectibles. Hope said over time the contribution required for KiwiSaver would have to increase. "We have the benefit of national super but there is still a significant gap when people retire. It's important people look at what they're going to need in retirement, how much they're going to need." He said about 20 percent of employers were already offering to match more than the minimum 3 percent contribution. Hope said KiwiSaver had made New Zealanders better off than they would be otherwise. "If you look at some of the collateral benefits that have occurred in Australia, they have enabled investment in a wide range of things… more significant infrastructure investment has come about as a result of the broader level of savings and the need to provide assets that can provide long-term income for people." He said New Zealanders' level of financial literacy had not improved in five years. "Including it in the school curriculum is an important step in making a big change over time." The "end game" needed to be ensuring New Zealanders were more confident and financially literate so they could choose investments and make discerning decisions, which would allow them to retire with dignity, he said. "With KiwiSaver being the primary investment vehicle for most New Zealanders, it's essential that we re-examine settings around contributions and enrolment. Ensuring people can maximise the benefits of KiwiSaver is critical not just for their retirement, but for the long-term financial wellbeing of the country. "At present, fewer than half of Kiwis feel financially prepared for retirement - a phase of life that should be defined by security and peace of mind."
