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Five-year KiwiSaver break too long

KiwiSaver members should not be allowed to “set and forget” a five-year contributions holiday, providers and industry commentators say.

Thursday, January 14th 2016, 6:00AM 1 Comment

by Susan Edmunds

Members can choose to opt out of their contributions for five years at a time. At the end of that period, they are asked whether they want to roll over on to another contribution holiday. If they do not respond, contributions automatically restart.

Therese Singleton, general manager of investments and insurance at AMP, said one of the things she would most like to change about the retirement savings scheme was the length of that contributions holiday.

She said people needed to realise the value of continuing contributions.

“The tax credit in itself is more of a return than you’re ever going to get on $1000 anywhere else and that in itself is reason enough to contribute,” she said.

David Boyle, group manager of investor education at the Commission for Financial Capability, agreed. He said people would forget they were not contributing.

“At the minimum they should get a letter each year telling them the impact of not having contributed over the year.”

Claire  Matthews, of Massey University, said people should look at their KiwiSaver accounts annually to determine whether the settings were still right for their circumstances.

She said it would make sense for those on a contributions holiday to be contacted every year to be asked whether they wanted that to continue.

ANZ general manager products and marketing Ana-Marie Lockyer supported a one-year holiday limit.

She knew of cases where people had got to the end of their five-year holiday and been surprised to find they had not been contributing. They had then wanted to contribute more to catch up.

"They probably would have preferred a reminder earlier."

But she said her only concern was that further changes to KiwiSaver might make people more hesitant to sign up at all.

“A reason a lot of people don’t join KiwiSaver is because of the constant changing. I support the idea but the time has to be right and it has to be rolled out in the right manner.”

Tags: AMP ANZ Claire Matthews Commission for Financial Capability David Boyle KiwiSaver

« KiwiSaver well-positioned for 2016Auto-enrolment would only add 5% to KiwiSaver: Report »

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Comments from our readers

On 15 January 2016 at 7:42 am Mojo45 said:
A 5 year contribution holiday suits those who're self-employed & saving & investing in other vehicles for retirement while still collecting the full MTC by contributing $1,042.86 into their KiwiSaver.

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