In the run-up to the September general election, Jonathan Eriksen, head of the eponymous Auckland-based actuarial consulting firm, has called for a three-pronged reform of the KiwiSaver regime that would re-establish banished incentives and introduce greater flexibility.
Eriksen said his KiwiSaver “election wish-list” would see both the dropped $1,000 ‘kickstart’ payment and employer contribution tax exemption reinstated following the September vote.
The government cut the $1,000 kickstart incentive more than two years ago, slicing an estimated $500 million over four years from the bottom line. Meanwhile, the employer superannuation tax concession (ESCT) – which applied on employer contributions of up to 2 per cent to both KiwiSaver and super accounts – was axed in 2012 for a fiscal return of about $700 million over four years.
“I would also like to see political support for disconnecting the age of entitlement for NZ Super from KiwiSaver,” he said. “It makes sense to lower the withdrawal age for KiwiSaver to 60 [from the current 65] for people who need, or are able to, access their savings earlier.”
According to Eriksen, KiwiSaver should be made more flexible to account for different individual circumstances rather than the more rigid approach some groups are lobbying for.
While Eriksen has proposed a relatively simple list of KiwiSaver tweaks – which he would like to see on the political agenda – another report also issued last week calls for a root-and-branch reform of the NZ superannuation system.
Co-authored by fellow actuary, Michael Chamberlain, ‘The missing 2016 review – building trust for life beyond work’ – proposes nine core components of a “sustainable, flexible, inclusive, successful retirement income framework”.
The paper says all public policy – including retirement income – should primarily be linked to how it boosts economic growth in NZ.
As well as calling for a “first principles” review of KiwiSaver, the NZ Superannuation Fund, financial services disclosure rules, the report also says the government needs to conduct more targeted research on the country’s savings and wealth accumulation habits.
Furthermore, the report says NZ’s current “illogical, inconsistent, complex and unfair” tax system should be scrapped in favour of one that taxes all income “at the saver’s appropriate marginal rate”.
“All ‘income’ should be used for income-tested welfare benefits,” the report says.
And rather than financial literacy, the report says education policy should primarily be focusing on improving “mathematical competence” via the school curriculum.
“Mathematical competence is central to making personal financial decisions about retirement and also to nearly every other part of our lives,” the report says.
Chamberlain said retirement income and politics should divorce after experiencing a generally unhappy relationship in NZ.
“We need to go back to the days of the Superannuation Accord, and keep retirement income out of the political arena,” he said. “NZ has one of the best retirement savings systems in the world, but we can make it better.”
The analysis, co-authored by fellow Michael, Littlewood, was intended as a rebuke to the 2016 Retirement Commissioner report, which Chamberlain said “trivialised an important issue”.
Chamberlain heads Auckland actuarial firm, MCA, and remains on the NZX books as co-founder of SuperLife – the super and KiwiSaver firm sold to the NZX in 2015 for $35 million.