January 2019

The new taxation bill (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matter) proposes several changes to be made to KiwiSaver. The bill is currently awaiting a select committee report, before it will be read again in parliament later this month.

Changes include adding new contribution rates of 6% and 10% to be added to the existing 3, 4, and 8 percent rates.

The proposed taxation bill will also allow a new demographic of New Zealanders over 65 to join the scheme for the first time. Employees will not be compelled to contribute for this age group, but can do so voluntary.

Other areas of change will involve increasing the accessibility of KiwiSaver by attempting to get more low-income New Zealanders to join the scheme. Kris Faafoi, the Minister of Commerce and Consumer Affairs, also expressed interest in changing the scheme’s “approach to those of limited life expectancy, and their options for withdrawing their money earlier.”

As part of the bill, the government will also start its yearly reviews of the current nine default providers. A number of changes were made during the last review in 2014, including increasing the numbers of default providers from six to nine, as well as the addition of a financial literacy element.

If the bill is passed, the changes to the contribution rate are expected to come into effect from April, and the over 65 group is expected to be given KiwiSaver access from July onwards.  



While in broad agreement with the changes, some experts criticise the bill, arguing that additional tweaks should be made to the scheme. Martin Hawes, chair of Summer KiwiSaver's investment committee, feels the changes do not go far enough. Hawes would like to see contribution by employees for the over 65 group be compulsory, rather than optional as in the current proposed bill.

Ayesha Scott, an AUT finance lecturer, believes changes should be made to the current minimum saving rate, as she believes the current 3% is not sufficient.

"There is no perfect number. But if the ultimate goal is to make sure New Zealanders are retiring with enough savings to live comfortably … we know living costs are going up. So people are going to need more savings," Scott told the NZ Herald.

Similarly, Claire Matthews, KiwiSaver expert at Massey University, also argues that a change should be made to the saving rates. While she doesn’t argue for an increase in the minimum rate, Matthews thinks the scheme should be more flexible by allowing people to increase their contribution rate by half a percent at a time. By doing so, she says, "if you have a pay rise, you can step it up without having an adverse impact."

Ultimately however, Matthews said, “constant tweaks create an environment of uncertainty." So while she remains supportive of the changes presented in the bill, Matthews “would like to see a period of stability,” and therefore fewer changes overall would be ideal for the present moment.