Leading KiwiSaver Provider Wants To See Scheme Improvements

One of the country’s leading KiwiSaver managers is calling for improvements to the $94 billion scheme, saying the current setup won’t support Kiwis’ retirement aspirations.

There are 3.25 million New Zealanders in KiwiSaver, with many contributing the minimum 3% of their salaries. Murray Harris, head of KiwiSaver and Distribution at Milford, says that is not enough, given the importance of KiwiSaver to New Zealanders’ financial futures.

Mr Harris says the scheme has been very successful in gathering membership, but several changes need to be made for KiwiSaver to better support New Zealanders in retirement, including:

• A gradual annual increase of 0.5% to contribution rates, reaching a total contribution of at least 10%
• Tax relief or concessions on contributions rather than PAYE rates to incentivise members to contribute
• Potential decoupling of employee and employer contributions for lower income workers so they could receive employer contributions, even if not contributing themselves, with potential tax relief for the employer

Mr Harris points to Australia as a good example for New Zealand to follow. Its compulsory savings rate is 11%, increasing to 12% by 2025. Contributions are generally taxed at a flat rate of 15%.

“People have this mindset that if they are in KiwiSaver, they’re okay,” Mr Harris says. “But really they’re probably only saving about half as much as they need to be. As an industry, we’re looking at how we can help people understand how much they need to save for a comfortable retirement and then help them achieve that. Advice and education is really important, as well as an upgrade of the KiwiSaver scheme.”

Mr Harris’ comments come in the context of Milford winning Canstar’s KiwiSaver Provider of the Year Award, for the fourth time in a row. Milford’s KiwiSaver Plan also won an Outstanding Value KiwiSaver Scheme award, as did both Fisher Funds’ schemes: Its KiwiSaver Scheme and KiwiSaver Two Scheme, for four and two years in a row respectively.

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