Government needs to consult widely on any proposed changes to KiwiSaver settings, according to Mint Asset Management marketing head, David Boyle.
Boyle said that mooted KiwiSaver reforms, including plans to link the annual member tax credit (MTC) to personal contributions, required input from industry and the public.
However, many industry insiders suspect the government will likely squeak in any updates to the KiwiSaver regime in the May budget without external input.
Commerce Minister David Clark confirmed a KiwiSaver review was in train during a Financial Services Council (FSC) webinar earlier this month.
While Clark revealed few details in the FSC presentation, he said “we are looking at possibilities that have been canvassed in other reviews”.
In particular, it is understood the government could make any MTC payments contingent on extra personal KiwiSaver contributions (above the mandatory 3 per cent employee contribution).
But Boyle told a subsequent FSC online seminar last week that the mooted proposal would see many members missing out on the MTC – the last remaining government incentive for KiwiSaver.
He said given almost 1.1 million KiwiSaver members already don’t contribute enough to garner the full, or any, MTC top-up (which maxes out at $521, plus a few cents).
“We first need to do the research to find out why so many members aren’t contributing even the minimum amount [to earn the MTC] before making any changes,” Boyle said. “There should be good consultation before the government introduces any other KiwiSaver reforms.”
But aside from the rumoured MTC downgrade, he said other reported proposals in the government KiwiSaver review might have merit, including: removing the age limits for receiving mandatory employer contributions (and MTC payments); banning ‘total remuneration’ packages that sacrifice KiwiSaver contributions for higher salaries; and, introducing a ‘sidecar savings’ vehicle administered in KiwiSaver but without the age 65 lock-in for withdrawals.
In his FSC presentation titled ‘The year of the tiger: will it roar or meow for the financial services industry in 2022’, Boyle also flagged regulatory reforms and market volatility as the big challenges over coming months.
Adviser licensing, ‘greenwashing’ rules, the impending Financial Markets (Conduct of Financial Institutions) Amendment Bill – or COFI, and the regulatory ‘value for money’ push in funds management were aligning with fragile market conditions to create the “perfect storm” this year, Boyle said.
Furthermore, he said the concept of retirement itself was due for an overhaul with an increasing number of New Zealanders set for longer working lives to bolster inadequate savings.
The fate of the rodent-based mascot operated by Sorted – the online financial guidance service operated by the Commission for Financial Capability (CFFC) – might be a good analogy for retirees in general, Boyle said.
“The Sorted mouse was retired in 2015,” he said, “but now even it’s back.”
Prior to joining Mint, he worked for several years at the CFFC.
