Latest news with #contributionRates
RNZ News
05-06-2025
- 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
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.
