‘NZ Govt snoozing, retirees losing’

Tamsyn Parker

New Zealand is lagging behind other countries by failing to undertake a comprehensive review of its retirement policy, a visiting expert warns.

David Harris, a global expert in pension policy, was visiting New Zealand this week and said the country was getting out of kilter with the rest of the world, where many had moved to increase the retirement age and push up savings rates.

“New Zealand needs to grasp the thorny needle of pension reform. It needs to have a comprehensive review.”

Harris said the country’s biggest issues were that the contribution rate for KiwiSaver scheme was too low while the fees charged by providers were too high.

“It is a double whammy,” Harris said. “New Zealanders are not putting in enough and charges are very high.”

KiwiSaver has a minimum contribution rate of 3 per cent for workers and 3 per cent from employers as well as an annual government subsidy of up to $521.

But Harris pointed to Ireland which was increasing its rate to 6 per cent from employers, 6 per cent from employees and 2 per cent from the Government and Australia where the rate is set to increase from 9.5 per cent to 12 per cent by 2025.

The issues with KiwiSaver were also compounded by people taking their money out to buy a first home when it should be kept aside for retirement, he said.

Millennials were struggling to get on the property ladder and were competing with the baby boomer investment generation who were using housing to generate an income because there was a lack of annuity products available.

Harris said there was a weakness in the system as nobody appeared to be driving pension policy in New Zealand.

The Retirement Commissioner is charged with reviewing pension policy every three years but the Government chooses whether to take or leave any of the recommendations.

Harris’ criticism follows an OECD report that found New Zealand’s state provision for retirement is one of the least generous compared to the average worker’s income.

The report found retirees in the Netherlands received more than 100 per cent of their country’s average working wage but Kiwi superannuitants get just 43 per cent — ranking it sixth worst equal with Australia.

The average across the OECD was 63 per cent.

Harris questioned whether retirement policy was a priority for the new Government.

“There seems to be a lack of confidence in the new coalition Government. Is this a priority for the new Prime Minister?”

“I don’t see leadership breaking out like [Helen] Clark and [Michael] Cullen.”

The Labour-led Government has indicated it would like to increase the minimum contribution rate for KiwiSaver but has not said by how much, when or how.

He said New Zealand’s governments had taken a big snooze on retirement policy by saying things were okay.

“When the new PM says she will resign before raising the retirement age, how does that foster debate?”

He questioned whether New Zealand could afford to keep kicking the can down the road on the issue of raising the age.

“New Zealand is now lagging and cannot afford to lag.”