Its KiwiSaver 2050 document, released today, identifies six issues to be tackled to improve the performance of KiwiSaver over the long term.
It said participation needed to be increased, contribution levels improved, more decumulation options were needed, focus should be put on financial literacy, there should be more political stability around the scheme, and improved scheme efficiency and effectiveness.
“Each of the areas identified above are complex and there are no easy fixes or quick solutions to achieving them,” said FSC chief executive Richard Klipin.
“However, the discussion paper does propose a number of ideas for further consideration and discussion to help drive better outcomes in these areas.
“For instance, increasing participation through providing a minimum level of saving so that those who are unable to join KiwiSaver can get started in the scheme.
“Or building contribution levels by increased engagement with KiwiSaver members in default funds to move them to more appropriate funds, making conservative funds less conservative, and continuing KiwiSaver contributions when a member is on parental leave.
“The paper also proposes consideration being given to the development of an annuity market in New Zealand to aid with decumulation, and the development of a political accord and dedicated Government Ministry to ensure ongoing stability and predictability in retirement policy-making.”
The paper notes that, although more than three million New Zealanders are KiwiSaver members, 1.2 million are not making regular contributions.
It said consideration should be given to requiring employers to make a minimum contribution of, for example, 2%, when an employee could not afford to contribute.
“An alternative to this approach is to decouple member and employer contributions. This would mean that the employer would contribute regardless of whether the member is or not. The Government contribution then could be used as an incentive for members to continue to contribute. This would ensure better equity while encouraging the saving habit.”
It said there could be built-in insurance products, to help keep people saving even if they were out of work due to accident or illness.
The rules could get tougher to encourage more savings, the report suggested.
Increasing the amount a member had to contribute to get the member tax credit from the Government could boost contribution rates, and incentives could be restricted to only those who made an active fund choice.
Members could be allowed to automatically increase their contribution rates, the FSC said, and contributions should continue for those on parental leave.
Advice was also among its recommendations.
It said financial advice could be made a tax-deductible expense, which would encourage more self-employed people to pay attention to their retirement savings plan.
It also urged a focus on advice for people who were about to retire.
“It is essential that New Zealanders entering retirement get advice to help through the next 15–20 years. At a minimum, information on decumulation and the range of options should be provided with the NZS information pack.
“Further, advice could be tied into with the SuperGold card currently provided to superannuitants and either provided free or at a discount.”
Roboadvice would also help, the FSC said.
“This will require thought on how to encourage and develop a robust offering in New Zealand.”
The full report can be found here.
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