Media Release

Mercer gives Budget pass mark for improving New Zealand's super future

Thursday 19th May 2011

Today's New Zealand Budget revealed continued baby steps towards a more sustainable retirement income system for New Zealand, and although it missed the opportunity to significantly improve our retirement savings environment, it provided positive steps in terms of managing the increasing economic pressure of an ageing population according to Mercer.

Mercer's Head of New Zealand, Martin Lewington, said in terms of KiwiSaver, the Government has passed the baton quite firmly to individuals and the private sector, which we believe was inevitable. We welcome the increase in the employee and employer KiwiSaver contributions from 2% to 3% by 2013.

"We believe KiwiSaver needs to be as attractive as possible to keep New Zealanders in the system and increase the probability of them enjoying the lifestyle we aspire to in retirement. So, as a short-term step an increase in contributions is good, but even at 6% we don't believe this is enough to significantly improve adequacy and contributions will need to continue to rise in the longer-term.

"The good news is that KiwiSaver remains an attractive savings vehicle for New Zealanders with employee contributions still matched by employers and reduced member tax credits remaining," he said.

Mercer also welcomes the recommencement of funding to the NZ Superannuation fund, planned to resume as of 2016.

"Pre-funding or fully funding superannuation is a core component to ensuring the sustainability of the current system," said Mr Lewington.

"The world's best retirement income systems are judged on their adequacy, sustainability and integrity. Today, the Government has taken steps to improve the adequacy of our system with increased KiwiSaver contributions and the sustainability with the resuming of funding to the NZ Superannuation fund - these are positive steps for New Zealanders' retirement security," he said.

The introduction of a range of new investment options open for New Zealand investors is also good news according to Mercer.

"We are particularly encouraged to see the introduction of inflation linked bonds, which we believe play a part in the annuity market and are a key component in inflation proofing any investor's portfolio, something we've been doing for some time in our own portfolios.

"The introduction of new investment options creates more opportunity for New Zealanders, for many via their KiwiSaver accounts, to invest in great New Zealand companies currently owned by the government," Mr Lewington concluded.

ENDS

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