Holidays a ‘kink’ in the armour
The architect of KiwiSaver is concerned about the nearly 130,000 people on contribution ‘‘holidays’’.
KiwiSaver allows people to stop contributions for a period of time, a feature designed to allow people to cope with sudden cashflow crunches, or to use their money to do other things, like pay down their mortgage.
But Sir Michael Cullen, who as Labour finance minister launched of KiwiSaver in 2007, now calls the holiday rule a ‘‘kink’’ in the design of KiwiSaver.
‘‘I am a little worried about the high level of members on holiday,’’ Cullen said.
Experts like David Boyle from the government-funded Commission for Financial Capability have suggested it is time to change the rules around KiwiSaver contribution holidays, as well as changing the name to something less ‘‘positive’’.
Currently, people can take a contribution holiday, and not have to reapply for a new one for five years. The commission recommended late last year that people should have to reapply after one year, forcing them to think about what it meant for their retirement to go another year without contributing to their retirement nest egg.
A poll done by the commission last year showed 52 per cent agreed to the proposed change but the Government has not acted on the suggestion.