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KiwiSaver could better serve low-income earners: AMP

Financial advisers play an important role in helping people on lower incomes navigate retirement savings, AMP’s general manager in New Zealand says.

Wednesday, June 28th 2017, 6:00AM 1 Comment

by Susan Edmunds

Blair Vernon said KiwiSaver could be improved to better cater for those who were not high earners.

He said he regularly spoke to people earning about $50,000 or less a year, who were facing enough of a financial challenge that it was not feasible to save for retirement. 

He said, while it was easy for the financial services sector to say that it should be possible for everyone to save 3% of their incomes, in some cases that was a significant amount and not the right decision to make.

Vernon said it was worth considering whether those earners should be given the option of saving 1% or 2% of their income, too.

“We need to be realistic about that.”

He said thought should also be given to whether the member tax credit should be reduced for higher-income earners, to allow more of that incentive money to be given to low-income KiwiSaver members.  Each KiwiSaver member can receive up to $521 a year from the Government if they contribute $1,042. The Government used to match it dollar-for-dollar.

"The changes made to water down the member tax credit have a much bigger impact on people with that level of earning," Vernon said.

He said sharing out the incentives in favour of low-income earners would make KiwiSaver more compelling for those earning less and would have an impact on their long-term outcomes.

It would probably be missed less by those earning more, he said.

"If you’re earning more than $2,000 a week and you didn’t get that $521 form the Government but you knew it was going to someone on a more moderate income, would that be a tragedy?"

He said there was also a challenge among middle-income earners who could afford to save but chose not to because they prioritised other spending. "They're making a conscious choice to consumer today versus looking after tomorrow. Sometimes they're not thinking all that through."

That was where advisers could help, he said.

“Advice is code for a bit of coaching. Sometime you need that to get perspective."

He said advisers could help not just with the technicalities of KiwiSaver but helping people understand what they were doing with their money and what they could do better.

Vernon said financial capability was a sliding scale and some people would be more capable while others were less, but they would all benefit from coaching.  “Advice and the role of advisers is fundamental.”

Tags: AMP

« Stubbs on attack with fee calculatorKiwiSaver: Advisers' saviour, or a lot of work for little gain? »

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Comments from our readers

On 28 June 2017 at 10:19 am comment1 said:
This sounds like a nice sentiment but has Blair done the maths and looked at the reality. Giving away $521 for a year might not sound a lot but doing that each year for say a 40 year old until the age of 65 adds up to around $13K (without taking into account any return on that amount). Adding the return for the same period probably takes it to around $20k which is probably a reasonably significant amount for a lot of people by the time they hit retirement no matter how wealthy they are.

No matter how honourable the idea I don't think it would be a winner when you start showing these type of amounts to the "wealthy".

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