BUDGET 2017: The wish list

Experts want changes in this week’s Budget

Retirement-industry experts want the Government to bump up the contribution rates for KiwiSaver and bring back the $1000 kick-start in this year’s Budget.

The National-led Government has a history of tinkering with the savings scheme in the Budget and has previously halved the Government contribution, taxed the employer contribution and cut the one-off $1000 incentive.

Last year it didn’t make any changes to KiwiSaver despite speculation of a one off auto-enrolment for all workers over 18 being touted as a possibility.

The Government talked up the idea of a one-off auto-enrolment in 2015 after it stopped the $1000 kick-start.

By the end of 2015 it had parked the idea citing affordability reasons.

But now the Government is well and truly back in the black it could be back on the agenda.

Binu Paul, principal of SavvyKiwi — an independent KiwiSaver research and tracking service — said mass autoenrolment was a possibility.

“The Government is in surplus right now.”

But he said already 2.7 million out of around 3.5 million working-age Kiwis were signed up to the scheme, which meant a mass auto-enrolment would not have a big impact.

Instead he would like to see the $1000 Government contribution reinstated and used to pay for independent financial advice — following a similar move in Britain.

“I think that would be a huge step forward for the Government to take.”

One of the biggest problems with KiwiSaver is the large number of people who are signed up to it but not contributing.

About 580,000 adults are getting either none or only some of the $521 tax credit which means they are putting in less than $1043 per year.

The industry would like to see an increase in the KiwiSaver contribution rate.

The minimum is currently 3 per cent for members, plus another 3 per cent from employers for those who are employed.

Karen Scott-Howman, chief executive of the New Zealand Bankers Association, said it would welcome any initiatives that helped people with their KiwiSaver investments, and encouraged more saving.

“As a debtor nation anything to boost national savings would help.”

Richard Klipin, chief executive of the Financial Services Council, said it wanted to see an increase in the contribution rates for KiwiSaver.

“The stark reality is the average fund size of 14k-15k — we are a long way from being able to retire successfully on this alone.”

KiwiSaver will be 10 years old on July 1 but balances remain low for many despite the total market now being worth $40 billion.

Claire Matthews, an expert in KiwiSaver at Massey University, believes the minimum contribution rate needs to be closer to 10 per cent just from the employee.

Matthews is also keen on compulsory membership for all and a review of the contribution holiday.

KiwiSaver members can put their contributions on hold for up to five years after being a member for one year.

“At the moment being able to take five years out means savings falls off the radar. People just get out of the habit of saving.”

Matthews said the maximum should be one year so people have to think about it every year.

The change is part of a raft of policy recommendations made by the Commission for Financial Capability to the Government and is also backed by the Financial Services Council.

Susan St John, director of the Retirement Policy and Research Centre at Auckland University would also like to see the kick-start brought back to protect new members from seeing fees erode their small contributions.

Perhaps the most likely change will be a side issue to KiwiSaver. The HomeStart grant, which gives firsthome buyers up to $10k per couple for an existing house or up to $20k for a new home, is likely to see some tweaking.

The Government has already indicated it may look at changing the caps on income and house price for the grant in Auckland.