Central Leader - - YOUR PAPER, YOUR PLACE -

I read the other day that I should be stick­ing 10 per cent of my salary into Ki­wiSaver.

No way. At least, no way un­til the Govern­ment re­designs it.

I to­tally agree that sav­ing just 3 per cent of your salary into Ki­wiSaver isn’t go­ing to be enough for a glam­orous re­tire­ment.

But Ki­wiSaver isn’t the place to put more than the min­i­mum amount needed to get your em­ployer’s con­tri­bu­tion, and the tax­payer-funded mem­ber tax credit.

The re­ally odd thing about Ki­wiSaver is it teaches peo­ple to in­vest in di­ver­si­fied port­fo­lios of cash, shares and bonds, and then dis­cour­ages them from sav­ing more than the ab­so­lute min­i­mum into it.

It’s a de­sign fault. It could be fixed.

Let me ex­plain us­ing the ex­am­ple of a per­son aged 65 who is still work­ing. This el­der cit­i­zen can save into Ki­wiSaver, with­out the money be­ing locked away. Get your em­ployer con­tri­bu­tions Get your mem­ber tax credit

Call for a bet­ter Ki­wiSaver

Should they need it, they can get it.

Fan­tas­tic. That’s Ki­wiSaver ful­fill­ing a sav­ings need for peo­ple do­ing that last dash to build up their re­tire­ment nest egg.

Now, let’s think about younger folk.

Say you’ve paid the mort­gage off at 55, 50, or even 45. Hooray for you, but don’t waste the won­der­ful po­si­tion you put your­self in. Carry on sav­ing... hard!

Ki­wiSaver, with its ef­fi­ciency, low(ish) fees and spread of in­vest­ments in cash, bonds, shares and prop­erty has done well for you.

And yet, you’d rightly pull up short at the idea of in­creas­ing your Ki­wiSaver con­tri­bu­tions be­yond the min­i­mum.

I mean, what if a great busi­ness op­por­tu­nity came your way and you needed cap­i­tal?

What if you fell on lean times?

Ki­wiSaver is sup­posed to en­cour­age a sav­ings habit, so why can’t we tweak Ki­wiSaver and let peo­ple al­ready sav­ing the min­i­mum, save more with­out lock­ing it away un­til they are 65?

Ki­wiSaver’s great dis­in­cen­tive to in­crease your sav­ings rate would have been re­moved.

What’s the al­ter­na­tive for that 45-year-old?

Let’s say he or she is with ANZ and opts for one of ANZ’s nonKi­wiSaver funds.

The man­age­ment fee on the ANZ Ki­wiSaver growth fund is 1.13 per cent. It’s 1.44 per cent on ANZ’s non-Ki­wiSaver growth fund.

Wouldn’t it be bet­ter for that per­son to get more rea­son­ablypriced fund man­age­ment through Ki­wiSaver?

I’ve been de­bat­ing my Ki­wiSaver ‘‘tweak’’ with Ki­wiSaver man­agers and ex­perts.

One felt it might make Ki­wiSaver overly com­pli­cated. An­other thought it a great idea. An­other said once peo­ple’s sav­ings hit a cer­tain level, they of­ten with­drew some to spend on re­wards (hol­i­days, new TVs, cars, etc) for hav­ing done so well.

Still an­other said Ki­wiSaver providers could be pro­vid­ing nonKi­wiSaver funds at the same price as their Ki­wiSaver funds. They just don’t want to be­cause if they did, they’d have to drop the fees on all the money al­ready in the higher-fee funds they cur­rently of­fer.

I’m re­li­ably told one Ki­wiSaver provider is plan­ning on dis­rupt­ing that lit­tle party.

Hands off! Money you stick into Ki­wiSaver can’t be got at un­til age 65, ex­cept in pretty ex­treme cir­cum­stances.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.