Employers should have to continue paying KiwiSaver contributions to people who are over 65, an academic has told politicians considering changes to the scheme.

Claire Matthews, an expert in retirement savings at Massey University, spoke to the finance and expenditure select committee today as part of her submission on the Taxation omnibus bill.

The bill includes proposals to drop the contributions suspension period for KiwiSaver from five years to one year, add new contribution rates of 6 per cent and 10 per cent and allow people over the age of 65 to join the retirement savings scheme.

But Matthews said she didn't see the value in opening the scheme to over 65-year-olds and believed a better change would be to make employers continuing contributing for those still working at 65 and over.


It is currently left up to employers to decide whether they will continue to contribute or not which Matthews said was inequitable.

"Currently the legislation says, irrespective of the age you joined, your employer does not have to pay their contribution to your KiwiSaver account once you turn 65.

"To me, that's unfair because a 65-year-old employee effectively gets paid less than their 64-year-old colleague."

Matthews said the committee seemed supportive of the idea.

"They agreed it was ageist."

She also disagreed with the approach of adding 6 per cent and 10 per cent contribution rates to the current 3, 4 and 8 per cent options saying it would be better to have a minimum and then options to increase it by half a per cent.

"A lot of people are only getting inflation-adjusted pay rises of one to 1.5 per cent these days. Being able to increase your KiwiSaver contribution by 0.5 per cent means you are still leaving a small amount of that increase in your pay packet, splitting the pay rise between your current and future selves."

Matthews said ideally it would be good to have an automated function to increase contributions at half a per cent a year but said that was probably going a step too far at the moment.

She said a 2 per cent increase was too much for a lot of people as it may be higher than their pay rise which meant they had to take a cut on what they got today.

"It's really hard to promote that idea."

Matthews also called for all KiwiSaver providers to have to provide financial education to their members.

At the moment only the nine default providers have an obligation to do this.

A spokesperson for BusinessNZ said a compulsory move would add to the wage costs for employers".

"The voluntary nature of KiwiSaver allows different decisions for different employers. There will be those who are happy to continue to contribute to Kiwisaver for workers aged over 65 as a way of retaining their valuable skills and experience, but it should remain a decision for each business to make," the lobby group said.