Money Editor for NZ Herald

Finance body has its say on retirement

Photo / Thinkstock
Photo / Thinkstock

The debate on retirement income is set to continue today with a major industry group due to release its recommendations on how to supersize New Zealanders' retirement income.

Last week the Commission for Financial Literacy and Retirement Income released 16 key recommendations including raising the age of eligibility for New Zealand Superannuation based around increased longevity and indexing the rate to consumer price increases.

Today the Financial Services Council, whose members include New Zealand's major savings and insurance providers, will come up with its own suggestions.

Peter Neilson, chief executive of the FSC, said its research had revealed most New Zealanders considered a comfortable retirement to be around double that of New Zealand Superannuation - now $357 a week for someone living alone.

To get that under the current KiwiSaver arrangement people would need to save 10 per cent of their income for 40 years from the age of 25, he says.

Most are currently contributing at either 3 or 4 per cent with those who are employed getting a further minimum 3 per cent employer contribution.

Neilson said its research had found most people wanted to save and save more but they either could not afford to do so or had not got around toit.

His proposal is expected to include lifting KiwiSaver contributions, while reducing taxes on the savings scheme to make it comparable to other investments.

Neilson also wants to encourage more savers to move from conservative funds, where most of the money is invested in cash and fixed-income investments, into more growth-oriented assets.

Changing the setting on the default KiwiSaver funds to a lifestages model where the level of growth assets is linked to age is under review by the Government. But there may be no change if the Government takes the same tack as the Retirement Commissioner's review.

It states that the default funds were set up with capital preservation in mind and it should be up to individuals to decide to move their money into a higher-growth investment fund or lifestages fund.

The review also made it clear that making KiwiSaver compulsory was not a good option as it would be perceived as an additional tax and would undermine the objective of encouraging individual responsibility and choice.

Martin Lewington, chief executive of Mercer, a KiwiSaver provider, said it was no surprise that the review came out against compulsion.

"I think we have been down that path before and found New Zealanders don't really like being told what to do."

But he was supportive of its widespread auto-enrolment recommendation.

The Government had planned to introduce auto-enrolment to all employed New Zealanders but delayed it in the last Budget because of cost concerns.

Bruce Kerr, executive director of Workplace Savings, said he would like to see auto-enrolment introduced as soon as the Government could afford it.

- NZ Herald

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