Kiwi retirement savings fall short
New Zealanders need to save more to maintain their standard of living after they retire, a fund provider says.
KiwiSaver fund operator Mercer released a report this afternoon analysing the areas of debate about KiwiSaver including contribution levels, taxation of contributions, life-cycle investment and the age of accessing retirement savings.
It said a higher contribution rate was needed to secure a more sustainable retirement outcome.
New Zealanders put in a minimum of 6 per cent of their wages made up of a 3 per cent employee contribution matched by their employers.
Mercer said a contribution rate of between 8 per cent and 10 per cent shared between employees and employers would allow Kiwis to enjoy a comfortable retirement and make the system competitive with other countries.
An increase in minimum contributions should be phased in to avoid discouraging membership of the scheme.
The increase could initially be applied to employers' contributions only to be more "palatable", Mercer says.
Mercer said there should also be a review of the taxation of contributions to KiwiSaver to encourage individuals to increase the amount saved.
At present there are no incentives to save more than the compulsory rate, and long-term saving was disincentivised by the tax.
The KiwiSaver operator strongly supported auto-enrolment in KiwiSaver be extended to all employees not already enrolled. At present only new employees are automatically enrolled as they join a workplace.
Greater coverage would lead to increased financial security for retirees, growth of the funds industry and an injection of funds into the wider economy. It would also provide an important step towards reducing reliance on New Zealand super, Mercer said.
The fund provider said New Zealand Superannuation was unlikely to continue to fund an acceptable quality of life for most people.