Help needed for more Kiwis to achieve their retirement goals

30 January 2020
A little help needed for more Kiwis to achieve their retirement aspirations

AMP Wealth Management supports the discussion around retirement incomes following the release of the 2019 Review of Retirement Income Policies by the Commission for Financial Capability.

“We support the need for certainty around the age of eligibility and the ongoing financial viability of New Zealand Superannuation, which provides a base level of income for people contemplating retirement. As a KiwiSaver provider our focus is on helping more New Zealanders to supplement New Zealand Superannuation through schemes like KiwiSaver so they can achieve the retirement they deserve after a life spent working.

“The important question we need to ask ourselves is: ‘What is my definition of retirement and will I have enough money to achieve it?’ The reality is that most of us probably haven’t figured out how much we need to save or how to get there, but it’s never too late to put a plan in place to help make it happen. We’re optimistic about the future of retirement savings,” said Blair Vernon, Chief Executive AMP Wealth Management.

There are several key areas AMP Wealth Management considers to be of importance.

Mr Vernon noted:

Increasing KiwiSaver contributions

“We know that contributing the minimum of 3% to your KiwiSaver is unlikely to deliver the quality of life in retirement that most of us aspire to, and New Zealand Superannuation by itself will not provide a sufficient level of income for most people after they stop working.

“As a way to help lift KiwiSaver contributions to around 10%, which should be an aspirational target for every KiwiSaver member, a ‘small steps’ employee contribution programme (as recommended by CFFC) is an interesting concept as long as it can be implemented effectively.

“Giving KiwiSaver members the option to set their own stepped increases, with the ability to turn it on or off at any time, may deliver a similar outcome with less implementation and administration complexity.”

Rebalancing Government contributions to provide aspiration to low-income earners

“Government contributions should be retargeted towards no/low-income earners who would benefit the most from increasing their savings but can’t afford to contribute more.

“If you’re a high-income earner you don’t benefit as much from the Government contributions and the reality is that they probably won’t make a significant difference to your retirement outcome overall, whereas the opposite is true for no/low income earners.

“At the same time, a review of the current taxation of KiwiSaver savings in the form of Employer Superannuation Contribution Tax (ESCT) could help to promote higher KiwiSaver balances.”

More employers need to step up

“Employers have a vital role in contributing to their employees’ wellbeing and encouraging them to save for retirement by making the most of schemes like KiwiSaver. This includes enabling access to financial advice, but it’s also about appropriately incentivising participation in KiwiSaver.

“While a number of businesses have taken advantage of what appears to be a loophole, we have always maintained the view that total remuneration packaging including KiwiSaver was entirely against the spirit and design of the scheme.

“This includes paying KiwiSaver contributions to employees who are under 18 and over 65 years’ old. Lots of good employers already do this, and just as increasingly employees want to work for employers whose values align with theirs, employees should ask potential employers about their approach to KiwiSaver.”
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