The Retirement Commission has cast doubt on a signal National pre-election policy after backing the current one-KiwiSaver-per-member regime.
In a KiwiSaver review published last week, the Retirement Commission urged the government to retain the successful, simple single-scheme approach in line with OECD recommendations.
The report notes that jurisdictions featuring multi-scheme membership of employment-based savings programs such as Australia and the US have A$16 billion and US$1.65 trillion, respectively, stuck in ‘lost’ accounts.
Furthermore, the Retirement Commission debunks claims that restricting KiwiSaver membership to a single scheme limits investment choice.
“There have been suggestions that providing access to multiple providers who offer a greater range of investments gives investors greater flexibility and choice. However, this is already available to investors through KiwiSaver providers such as InvestNow and KiwiWRAP,” the report says.
In the run-up to the October 2023 election National announced plans to allow “KiwiSavers to invest in more than one provider, driving innovation, boosting competition and putting downward pressure on fees”. As well, National suggested multi-scheme membership would open up the prospect for funds to hold more illiquid assets including NZ start-up companies.
But such a move would just transfer “liquidity risk, currently sitting with the KiwiSaver provider, to the member”, the Retirement Commission report says.
“If such arrangements were allowed it would require members to understand the complexity of illiquid investments and the commensurate risk,” the review says. “… For sophisticated investors there are already options to pursue these investment strategies outside of KiwiSaver.”
Among 14 other non-binding recommendations, the Retirement Commission report says the government should:
- retain opt-out KiwiSaver provisions (no compulsion);
- increase the minimum employer contributions to 4 per cent and extend such payments to non-contributing employees and those aged over 65 and under 18;
- ban ‘total remuneration’ salary packaging;
- increase the government ‘member tax credit’ contribution for self-employed and other non-employees as well as those aged under 18; and,
- open up membership to those on temporary visas.
The review also calls on the government to “require providers to share anonymised disaggregated data (ideally with the FMA), to allow more detailed reporting and analysis to be undertaken”.
“In addition we recommend that Government collect disaggregated data on wealth, in particular through the use of longitudinal studies, to enable changes to household wealth to be assessed over time.”
Retirement Commissioner, Jane Wrightson, said in a statement that KiwiSaver had been successful in growing retirement savings in NZ since launch in 2007 “but it’s time to look at it again”.
“By implementing changes, we can ensure that KiwiSaver continues to serve New Zealanders well into the future, providing a safety net that adapts to the changing tides of work and life,” Wrightson said.
In the wake of the Retirement Commission report, the Financial Services Council (FSC) reiterated its call for a “bi-partisan” review of the KiwiSaver system.
The industry body says its KiwiSaver policy hinges on “increasing participation, growing contributions, and building the financial capability of New Zealanders”.
“We look forward to a close working relationship with Te Ara Ahunga Ora, Retirement Commission and our industry to advance the terms of the KiwiSaver review,” the FSC says.