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RNZ News
2 days ago
- Business
- RNZ News
Concerns KiwiSaver is being used as 'piggy bank' to solve financial woes
In April, 4220 people withdrew savings for financial hardship reasons, up from 3700 in April 2024. Photo: 123rf KiwiSaver is in danger of being considered a "piggy bank" to solve all of New Zealanders' financial woes, one provider says, and too many people are tapping into their savings on hardship grounds. Founder of Kōura KiwiSaver scheme Rupert Carlyon was wary of calls for settings to be changed to allow people to use their [ money to buy farms]. He said KiwiSaver was already being called on to solve the country's housing and infrastructure crises. Carlyon said changing the rules to allow more withdrawals sent the wrong message to people, who should be using KiwiSaver for their retirement. Instead, they were tapping into KiwiSaver in growing numbers. In April, 4220 people withdrew savings for financial hardship reasons, up from 3700 in April 2024. They withdrew a combined $37.6 million. "It encourages more and more people to think about it like a piggybank. It's scary what's happening in that space," he said. He said he saw people making repeated hardship withdrawals, depleting their balance. "People come back multiple times with the same claims… it's hard to figure out what's real and what's not." He said it would now not be possible to close the "hardship loophole" because people expected it to be available and any change could dent confidence in the scheme. But he said it should be tightened up so there was a limit on the number of withdrawals that could be made within a certain timeframe. "The other part is it's very resource intensive. We spend on average up to six hours per financial hardship claim... It's hard on staff because they often have to say no when they want to say yes." A spokesperson for Public Trust, one of the KiwiSaver supervisors, said people were not required to repay hardship withdrawals if it was found they were not necessary. "Their future self might not thank them for dipping into their retirement savings. We see situations of real and urgent need… there are strict rules and checks in place to help ensure withdrawals are only approved for genuine financial hardship, and applicants need to sign a legal declaration confirming their situation. "If someone doesn't use funds as intended, it could affect their ability to make another hardship withdrawal in the future." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
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."
RNZ News
23-05-2025
- Business
- RNZ News
Budget 2025: Who's worse off under new KiwiSaver changes?
An increase in contribution rates for KiwiSaver won't benefit everyone. Photo: RNZ / REECE BAKER 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. Finance Minister Nicola Willis revealed the KiwiSaver changes in this year's Budget. Photo: RNZ / Samuel Rillstone 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 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 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." Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
