The FSC has welcomed the Government’s Budget announcement to increase the default KiwiSaver contribution rate, but cautions on the implications of the decision to reduce the Government contribution.
A statement from the council says it welcomes the Government’s Budget decision to increase the default KiwiSaver contribution rate from 3% to 4% by 2028 and in extending government and employer contributions to working 16-and 17-year-olds “…recognising the importance of stronger savings habits in improving long-term financial wellbeing for New Zealanders.”
It says New Zealand’s current default minimum employee and employer contribution of 3% is among the lowest in the OECD. The FSC suggests a combined contribution goal by 2037 of 10 percent – the 30th anniversary of KiwiSaver.
“Today’s announcement gets us closer to the contribution goal, however the Government’s decision to reduce its contribution* could discourage enrolment in the scheme or a commitment to contributing during periods of low income, such as maternity leave, and particularly for the self-employed.”
The FSC says a higher contribution rate is an important step toward ensuring that future retirees can maintain a standard of living consistent with their working years.
…employers and employees need time to adjust to higher contribution rates…
“A phased approach is crucial to ensure this is sustainable for workers and employers alike – employers and employees need time to adjust to higher contribution rates.”
The council says it looks forward to “…continued collaboration with the Government to further strengthen the KiwiSaver system in line with a clear, long-term strategy.”
*[The Government’s statement on the KiwiSaver changes states the annual government contribution will be halved to 25 cents for each dollar a member contributes each year, up to a maximum of $260.72. Members with an income of more than $180,000 will no longer receive the government contribution.]