Calls for increased savings
The Retirement Commission has released an analysis of KiwiSaver, identifying several key areas for improvement.
Retirement Commissioner Jane Wrightson (pictured above) has proposed 15 recommendations aimed at enhancing this pivotal component of New Zealand’s retirement income system.
Push for higher contribution rates
Wrightson suggested increasing the default contribution rates to at least 4%, with a matching amount from employers, to address the lower-than-expected balances in KiwiSaver accounts.
“I’d like to see a higher default contribution rate of at least 4% with employers matching at this level or more. We know that default rates are ‘sticky,’ meaning people tend to stay with them,” she said in a media release.
See LinkedIn post here.
Challenges and opportunities
The retirement commissioner elaborated on the economic challenges facing savers, notably high inflation and living costs, which complicate efforts to save for retirement.
“KiwiSaver balances across all the age groups are lower than we would have expected after almost 18 years of the scheme, and we need to improve this,” Wrightson said.
Current KiwiSaver system performance
The report confirmed that the existing frameworks for joining and contributing to KiwiSaver are effective, with high levels of membership and participation. It also addressed the barriers to contribution faced by certain demographics, such as the self-employed, who lack sufficient incentives under the current setup.
Proposed changes to enhance KiwiSaver
Recommendations include maintaining the one-provider membership model, increasing government contributions for those without employer matching, and extending benefits to under-18s and over-65s.
Furthermore, the report suggested adjusting policies to support KiwiSavers on parental leave.
Read about the Retirement Commission's 15 recommendations here.
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