Time to Make KiwiSaver Predictable and Sustainable
Thursday 12 May 11 9:09pm
The Investment Savings and Insurance Association (ISI) says that while some changes to KiwiSaver are probably unavoidable given the current economic difficulties the country faces, now is the time to introduce changes that will provide certainty and ensure the long term sustainability of KiwiSaver, and that this will require cross-Party support given saving for retirement will cover more than the terms of ten Governments.
The Association, representing fund managers that collectively manage over 90% of the money invested in KiwiSaver funds, says that no area of Government expenditure can be immune from cost savings in the current economic environment.
“While it is disappointing the Government is planning changes to KiwiSaver to reduce the overall Budget deficit, what is pleasing is that although they are looking to adjust the Member Tax Credit scheme, the Government has signalled its long term commitment and support for KiwiSaver,” says Peter Neilson, ISI CEO (under the Member Tax Credit scheme, the Government provides matching contributions of up to $1,043 each year to individual KiwiSaver accounts).
ISI believes that we need to secure cross-Party support to create a stable and sustainable policy for KiwiSaver, and to focus on making a single set of changes that will last a generation.
“There are now more than 1.6 million people enrolled in KiwiSaver, making it New Zealand’s most successful attempt to get people saving. We believe that it is time for New Zealand’s political parties to agree on the future of KiwiSaver and then let people get on with the job of saving using a vehicle they can trust,” says Mr Neilson. “Constantly making changes to it to serve political agendas gives Kiwis no faith in the future of their savings, and will only serve to limit national long term savings,” he says.
“Moving to increased employer contributions will create a more sustainable savings platform and create the level of capital required to invest in raising national productivity,” explains Mr Neilson. “Our only caveat to this is that increasing contribution rates needs to be signalled well in advance and structured in a way that provides certainty and allows time for adjustments to be made by employees, employers and fund managers.”
ISI says that there are a number of areas where further improvements could be made to KiwiSaver and they welcome the opportunity to work with the Government to make these changes happen. “There were a number of recommendations made by the Savings Working Group that we believe merit further work,” says Mr Neilson. “For example, removing the over taxation of investments in KiwiSaver and superannuation funds, and simplifying and standardising the reporting of fees and returns are two areas that would have significant positive impact for savers.”
The ISI says most New Zealanders recognise that Australia has created a national superannuation scheme where the average Australian has made a superior provision for their retirement. The key to their success, the Association believes, is that the Australian Government has had a single minded commitment to deliver a scheme that is stable and sustainable, and provides people with long term certainty and confidence.
Now is the time for New Zealand to do the same.