FSC Welcomes Labour’s Plan for Comfortable Retirement
17 June 2014
FSC Welcomes Labour’s Plan to Help More New Zealanders Achieve a Comfortable Retirement
The Financial Services Council (“FSC”) welcomes Labour’s Plan to help more New Zealand employees achieve a comfortable retirement by stepping up KiwiSaver contributions up to 9% over time.
Only 8% of New Zealanders believe they could live comfortably on NZ Super alone. Most New Zealanders say they need about two times NZ Super(currently $282 per week for each of a couple) to be comfortable in retirement. For most New Zealanders KiwiSaver is their only means of getting to a comfortable retirement.
A combined 9% KiwiSaver contribution rate is sufficient to achieve a comfortable retirement after 40 years saving even for someone on the minimum wage.
FSC, CEO, Peter Neilson said that the Labour Plan to step up contributions gradually so everyone is eventually saving 9% (split 4.5% from themselves and 4.5% from their employer) is consistent with our earlier advice and what our polling says is acceptable to the public.
Starting current non KiwiSavers at only 1% and stepping up contributions by 1% a year and 0.25% a year for existing KiwiSavers addresses concerns about affordability for employees. It is useful to remember that when Australia started its journey on compulsory superannuation in 1992 their wages were about the current level in New Zealand.
If KiwiSavers were to default into Balanced or Growth funds rather than the current Conservative funds and the over-taxation of KiwiSaver funds was also addressed, the contribution rate required could drop below 9%. The FSC has pointed out that removing the over-taxation of KiwiSaver funds to achieve a fair tax system for savers could have substantially been paid for by phasing out the $521 Member Tax Credit that Labour has committed to keeping.
We look forward to hearing from other parties their plans for expanding access to a comfortable retirement using KiwiSaver.