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Tweak taxes, lift minimum KiwiSaver contributions, FSC urges

Friday 7th September 2018

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The Financial Services Council is urging the government to add sweeteners and raise minimum contributions to KiwiSaver if it's serious about ensuring New Zealanders enjoy a well-funded retirement. 

The industry lobby for fund managers and insurers outlined four recommendations in a report seeking to bridge the $218 average weekly shortfall someone will need in retirement to live comfortably. At the top of the list was increasing the minimum employee and employer contribution to 4 percent each, something 70 percent of respondents in accompanying research would support. The paper also recommends a review of default fund allocations, "further tax or other simple incentives" to encourage savings, and a decoupling from the retirement age. 

"The recommendations are ambitious and it's heartening to see the government is making moves to address some of these issues. It's a great start," FSC chief executive Richard Klipin said. "We believe they are achievable and they will provide a blueprint for closing New Zealand's future savings gap." 

Finance Minister Grant Robertson last month told the NZ Shareholders' Association he's targeting the missing million people not in KiwiSaver in an upcoming review of default providers, while the Retirement Commissioner will also investigate KiwiSaver fees and investment practices in the 2019 review of retirement income policies. 

The FSC report also recommends cross-party work on a superannuation strategy to "ensure that the most vulnerable in our society are protected". New Zealand's pension age and universal entitlements are a highly political issue, with independent reviews and Treasury advising an increase in the age as a means to address rising life expectancies and the associated increase in health costs. 

The final recommendation is to make it easier for people to access advice and switch between providers. Financial Markets Authority research has found few people get personalised advice for their KiwiSaver investments and has provided an exemption for automated digital advice, known as robo-advice, ahead of a legislative change to the adviser regime. 

(BusinessDesk)

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