Bosses a barrier to worker savings
A study suggests some business owners are turning staff off KiwiSaver, writes Rob Stock.
The attitudes of small-business owners could be playing a role in stopping some people from contributing to KiwiSaver. KiwiSaver provider AMP has been conducting ‘‘deep dive’’ research into why so many KiwiSavers are noncontributors, including many on formal contribution ‘‘holidays’’.
At the end of March last year, about 1.1 million members were not making regular savings into KiwiSaver.
Phase one of the AMP research involved more than 500 interviews with KiwiSavers, which revealed some of the myths and barriers to people salting money away for their retirement.
Phase two involved sampling the attitudes of owners of small and medium-sized enterprises (SMEs), some of whom may be discouraging staff from contributing. It specifically focused on owners who were ‘‘less supportive’’ of KiwiSaver.
AMP discovered that low-paid workers at SMEs often preferred cash in hand to contributing part of their incomes to KiwiSaver, and that employers are not always telling workers about the benefits of being in KiwiSaver.
The SME bosses themselves sometimes saw KiwiSaver as being an extra cost and administrative burden.
Some worried that making KiwiSaver contributions left their business at risk because their income could be extremely variable, and there was no way to ‘‘stop and start’’ KiwiSaver contributions to staff schemes, if their businesses’ income dipped, or rose.
‘‘It’s a tap you can’t just turn off, especially [when] dealing with fluctuating business income,’’ said one.
AMP found that employers were key influencers of whether people contributed to KiwiSaver, but some did not actively promote KiwiSaver.
That appeared to partly be a result of owners themselves not relying on KiwiSaver for their retirement saving.
Some even encouraged staff to invest in alternate things, like property.
‘‘My staff know my views on KiwiSaver. Could be why they’ve opted out. We’re coaching one of our staff to invest in property. My main bugbear is non-guaranteed returns,’’ one owner told AMP.
SME owners also did not see KiwiSaver as a means of attracting workers, who were generally more interested in pay rates, and flexible hours. Younger workers in a ‘‘job’’ rather than a career just weren’t interested, some owners said.
AMP also found that some SME owners were unable to talk confidently about KiwiSaver, and believed it was ‘‘safer’’ not to, but most did feel an obligation to help their workers.
AMP’s Blair Vernon said the aim of the research was to understand the factors leading to people failing to contribute to KiwiSaver, including the role employers were playing.
‘‘Many people will spend their careers at SMEs, but they are not going to be owners. What are their retirement prospects going to be if there’s no active encouragement by their employers?’’
The research findings were not representative of all SME owners.
Vernon said the Government’s plans to lift the minimum wage to $20 by 2020 offered a tremendous opportunity to encourage more workers, shut out of KiwiSaver by low incomes, to begin making contributions towards the scheme.
But that would be easier for lowerpaid workers, if the minimum KiwiSaver contribution rate was not set as high as 3 per cent of gross salary.
‘‘Three per cent is potentially too big a step for them to begin the KiwiSaver journey,’’ he said.