New Zealand's Retirement Commissioner is sounding the alarm on the country's retirement income systems, calling for urgent reforms to KiwiSaver and NZ Super to ensure a fair and sustainable future for all.
In a recent report, the Commissioner highlights 12 key recommendations to the government, with a focus on supporting those most in need. But here's where it gets controversial: the current system, they argue, leaves low-income earners behind, especially in the wake of recent government decisions.
"The government's decision to halve its annual contribution to KiwiSaver accounts disproportionately affects those with lower incomes," the Commissioner explains. "It's time to target government support where it's needed most."
The report proposes increasing government contributions for low-income earners, potentially funded by phasing out contributions for higher earners. This approach aims to bridge the savings gap and ensure a more equitable retirement income system.
But that's not all. The Commissioner also calls for increased support for those on paid parental leave, suggesting a $1000 contribution from the government, regardless of personal contributions. Additionally, they advocate for employer contributions to continue for those over 65 and for temporary visa holders to have access to KiwiSaver benefits.
"If we want migrants to stay and contribute to our society, we should provide them with incentives," the Commissioner adds.
One innovative idea proposed is the "sidecar" savings account, designed to provide a safety net during financial emergencies. This sidecar account would work alongside KiwiSaver, allowing individuals to access funds without dipping into their long-term savings.
"Financial shocks can derail retirement plans," the Commissioner warns. "Sidecars offer a way to mitigate this risk."
The report also tackles the issue of total remuneration packages, calling for a ban on this practice. Under total remuneration, both employee and employer contributions are paid from a set salary package, which goes against the spirit of the scheme, according to the review.
"Many of these recommendations aim to simplify and enhance the fairness of KiwiSaver for all," the Commissioner emphasizes. "We need to ensure that those in secure, well-paid jobs aren't the only ones benefiting from employer contributions."
The report further calls for improved reporting and a nationally consistent framework to help retirees manage their finances.
But the Commissioner stresses the need for long-term political agreement across major parties to provide stability and security for future retirees.
"We can't keep tinkering with the system," they argue. "We need a holistic approach that considers KiwiSaver and NZ Super together, to create robust mechanisms that New Zealanders can rely on."
The report concludes with a call for a Parliamentary working group to develop a 10-year retirement income roadmap, ensuring a secure and trusted system for all New Zealanders.
