The New Zealand Retirement Commissioner has called for changes to be made to the KiwiSaver system.
Te Ara Ahunga Ora Retirement Commission has released a comprehensive analysis on how the current settings for joining, contributing, and withdrawing from KiwiSaver are working. KiwiSaver is a crucial component of the retirement income system.
Retirement Commissioner Jane Wrightson has made 15 recommendations for the Government, as well as several to KiwiSaver providers, the wider financial services industry and employers to improve the scheme.
“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.
“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. The reality is we all need to be saving more for our retirement but know that it’s particularly challenging against the current backdrop of high inflation and cost of living challenges.”
The KiwiSaver Opportunities for Improvement paper delves into the history of the retirement savings scheme, and uses data from the Inland Revenue, the Financial Markets Authority and the Retirement Commission’s own research to analyse KiwiSaver and identify where there are opportunities for improvement.
“Throughout the paper, we’ve stress-tested some of the suggestions that have been floated across various quarters and posed some new ideas we think would improve KiwiSaver,” said Wrightson
“Making KiwiSaver compulsory is one that comes up frequently in discussions, but when you consider the evidence, we already have high membership. Those not contributing are most likely not in paid work, on low incomes, or self-employed.”
The Retirement Commissioner said the biggest opportunities for change to KiwiSaver is to increase contribution rates by individuals and employers.
“We believe the existing soft compulsion setting of auto-enrolment with opt-out, and the ability to opt-in directly is working. However, improvements could be made to incentivise the self-employed to contribute to the scheme.”
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