17 May 2007

Mercer Welcomes Budget Boost To Kiwisaver

Mercer has applauded the changes to KiwiSaver announced by the Government in today’s budget saying the incentives would promote New Zealanders’ good long term savings habits and substantially increase individual uptake of the KiwiSaver scheme.

Tim Jenkins, Head of Mercer in New Zealand said the tax credits on employee contributions to KiwiSaver, and phased compulsory matching employer contributions were a great sweetener to boost retirement savings in New Zealand. This will have many long-term benefits for New Zealand.

“If you can afford to contribute to a KiwiSaver scheme, then you should do so. This is the strongest incentive we’ve seen yet to encourage New Zealanders to save more for their retirement, and an opportunity that should be taken advantage of.”

Mercer said that employers should use the period up until 1 April 2008, before matched employer contributions apply, wisely and prepare remuneration and rewards policies that were satisfactory for both the business and its employees.

“This may represent a real moment of truth for employers and their employees. We encourage employers not to view compulsory KiwiSaver contributions as an additional or surprise cost to bear but as an opportunity to engage with employees and create a compelling reward and retention tool,” Mr Jenkins said.

Mercer was also pleased that the Government has made every effort to extend the KiwiSaver enhancements to existing superannuation funds which become complying superannuation funds. “This will substantially reduce the potential leakage of existing retirement savings from non-KiwiSaver arrangements that might otherwise occur, Mr Jenkins commented.

Mercer did, however, call for a swift resolution of regulatory issues relating to existing superannuation funds so that employers and trustees were able to make their existing arrangements complying superannuation funds, and ensure as many individuals as possible are able to take advantage of the changes.

“There will be some issues for employers and trustees to iron out. Many employers were planning to make company contributions to KiwiSaver as part of the 4 per cent contribution level. The company contribution can no longer be part of the 4 per cent for those who join KiwiSaver after 1 April 2008.

“Also, we are concerned that a number of New Zealand’s major employers operate hybrid funds which have defined benefit components. Currently these funds cannot comply with the KiwiSaver regulations until remedial legislation is passed. This means that there will be a delay before a significant number of existing fund members can take advantage of the changes to KiwiSaver,” Mr Jenkins added.

Mercer also welcomed the requirement for funds to disclose their approach to responsible investment.

“Responsible investing is an issue of growing importance to the public, but one that also needs to be thought through and implemented carefully to protect the interests of fund members. Mercer has responsible investment specialists globally so we do intend to make recommendations to the working party on this issue,” Mr Jenkins said.

ENDS

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