Politicians create further inequality with KiwiSaver change

Media Release

18 February 2019

Hawes: Politicians create further inequality with KiwiSaver change

Financial Advisor Martin Hawes is urging the Government to make employer contributions to KiwiSaver members over 65 compulsory, matching the Taxation Bill’s amendment to KiwiSaver which removes the lock-in period and opens up the scheme to workers over 65.

As the Taxation Bill progresses towards a third reading and into legislation, Hawes is urging Members of Parliament to go further than simply allowing those aged over 65 to join the scheme.

He says currently, with employee KiwiSaver contributions for over-65s voluntary, many Kiwis could effectively face a pay cut when they turn 65.

“Why should a 64 year old earn more than a 65 year old for the same job?”, asks Hawes.

“The days of turning 65 and putting your feet up are pretty much gone. Many Kiwis continue to work and the legislation should recognise this,” he says.

“Effectively we’re saying you can stay in KiwiSaver but your employer is free to cut your pay when you turn 65, if you have been in KiwiSaver for more than five years. It’s disappointing that MPs have failed to see the inconsistency in this amendment – and it would be easy for our politicians to amend” Hawes says.

He predicts if this doesn’t change, people will continue to turn away from KiwiSaver when they turn 65, when, in fact, it can be helpful for both them and the Government if they remained in the scheme during retirement.

“When you think about the need to convert a lump sum into a regular income during retirement, KiwiSaver offers over-65s one of the most practical and cost-effective solutions there is,” he says.

“They can potentially achieve a greater return on their money through KiwiSaver than through a term deposit or the like, and they can still access funds as needed. KiwiSaver gives a good ready-made investment solution to those over 65 and they should have the same deal as their younger work mates.”

Hawes says staying in KiwiSaver, or joining after turning 65, is generally a low-cost way for retirees to ensure that their money is working for them and easy to manage.

“I’m all in favour of the Bill’s current thrust, which will allow over-65s to join KiwiSaver for the first time, but the Government should be asking itself whether it is right to discriminate against this group when it comes to employer contributions.”

Currently over-65s can remain members of KiwiSaver if they have joined prior to turning 65 but cannot join or re-join the scheme after they turn 65. Once they turn 65, if they have been in KiwiSaver for more than five year and choose to stay members, employer contributions to their accounts become voluntary.

The Taxation (Annual Rates, Business Taxation, KiwiSaver, and Remedial Matters) Bill was introduced to Parliament last July and had its second reading on Thursday.

Hawes says there is still plenty of opportunity for the legislators to take the extra step and level the KiwiSaver playing field for over-65s.

Ends.

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