Where are they?
On the trail of the missing KiwiSavers
The ten-year anniversary of KiwiSaver takes place next month, and still the mystery of the missing KiwiSavers remains unsolved.
KiwiSaver launched on 1 July 2007, in the optimistic period before the Global Financial Crisis shook the world.
It was to be the super scheme that got New Zealand saving, and Labour’s back door way of giving Kiwis a tax cut, without them rushing out to spend it on property or consumer goods.
But at the end of June last year, 43 per cent of KiwiSavers weren’t making regular contributions.
There’s a growing chorus of calls to understand what’s behind that, including from the Commission for Financial Capability (CFC) and giant KiwiSaver manager AMP.
And some believe it’s time for a rethink to stop KiwiSaver incentives from flowing to the rich, while the poor miss out.
The poorly paid:
‘‘Poor families make poor choices out of necessity,’’ says Chas Muir from the E tu food sector union.
Minimum wage workers simply can’t afford to make KiwiSaver contributions, he says.
Peddling poverty wages protects employers from having to make many matching KiwiSaver contributions.
‘‘We have paid workers who have to make the choice of whether to take a sick child to the doctor or dentist, or put food on the table.’’
For such people, KiwiSaver isn’t an option.
In 2015, the economists at NZIER found lower levels of engagement with KiwiSaver among people on lower disposable household incomes, such as single people, renters, the heavily indebted and the poorly educated.
There’s evidence that while the well-paid get the full member tax credit (MTC) taxpayer subsidy of $521.43 a year, many lower-paid workers miss out entirely, or only get part of it.
The 2014 KiwiSaver Evaluation report found less than half of KiwiSaver members got the full MTC, meaning they, and their employer, had contributed less than $1042.86 during the year.
AMP’s general manager Blair Vernon, called for MTC policy to be re-evaluated, including looking at stopping paying MTCs to people on incomes of $100,000 or more, while doubling the MTC for lower-paid workers.
That would give them a $1 member tax credit for every $1 they saved, while middle-income earners would still get 50 cents in credits for every $1 saved.
The CFC’s David Boyle, said consideration could also be given to 1 per cent and 2 per cent contribution rates, to make it easier for lower income families to save something.
The self-employed:
‘‘Many self-employed members choose to make lump-sum contributions close to the end of their tax year, rather than commit to regular contributions,’’ the Financial Markets Authority reported in its latest annual KiwiSaver report.
These non-contributors are not missing at all. They’re just saving the minimum to get the full MTC.
The oppressed:
Vernon has heard anecdotal evidence that some employers make it clear that workers who want KiwiSaver have no future at their workplace.
‘‘The question is, if your employer is not happy doing the paperwork, how confident are you in pushing for it?’’ Vernon asks.
In many cases lower-powered, younger employers in low-paid employment, joining on a 90-day trial period may well not dare. ‘‘They feel like they are walking on eggshells,’’ Vernon said. He called for research to study whether this was widespread. There are also a number of employers failing to make KiwiSaver contributions.
At the end of June 2016, the amount owed by errant employers was $24.9m, according to the IRD.
The children:
There was a rush to sign up children to KiwiSaver to get the now scrapped $1000 Kickstarter. The result is 338,038 KiwiSavers under the age of 18. They don’t qualify for MTCs, and many do not earn regular income.
Those in dire straits:
In every phase of the economic cycle there are some people who fall from prosperity to penury. In KiwiSaver that is reflected by people withdrawing money for hardship reasons.
In May, for example, 190 people withdrew money from KiwiSaver citing financial hardship. None would be contributors.
The holidaymakers:
The CFC called on the government to limit contribution ‘‘holidays’’ to just one year before KiwiSavers had to apply again for a new one, but the suggestion hasn’t been welcomed.
KiwiSavers can go five years before they must reapply. The majority of the 130,000-odd holidaymakers are on holidays of five years, or more.
Poor families make poor choices out of necessity. Chas Muir