Fresh off the back of a major shake-up to the default provider regime, Consumer Affairs Minister David Clark has signalled the Government is looking into more changes to KiwiSaver.
Speaking at the Financial Services Council conference today, Clark told around 800 finance professionals that he was having a look at the KiwiSaver settings.
“KiwiSaver has gone from strength to strength over the last 15 years but there are still things we can tweak, including the contribution settings to get more members enrolled.
“If we get these things right we can increase financial resilience, improve equity in the system and improve the depth of our capital markets.”
According to the Financial Markets Authority’s annual KiwiSaver report, just over 3.09 million people were members of the scheme as of March 31, with $81.6 billion invested.
But only 1.88 million of those members contributed to their account during the year. That was up 3.9 per cent compared to the prior period but still remains well short of the total number of members.
In 2019 the Retirement Commissioner made a number of recommendations to change KiwiSaver including introducing a small-steps approach that would automatically increase member contributions by 0.5 percentage points a year until it reached 10 per cent or the member opted out.
The commissioner also recommended changing the government’s contribution to better incentivise voluntary contributions to KiwiSaver by non-employees.
Currently, the government puts in 50c for every dollar a member contributes up to a maximum government contribution of $521 per year.
But the commissioner has recommended the government increase its match of voluntary contributions by putting in $2 for every $1 contributed up to $2000 per annum in a move that could replace the existing incentive.
In order to keep costs down, she recommended this incentive be limited to the first 12 years of KiwiSaver membership.
Another recommendation was that beneficiaries be auto-enrolled in KiwiSaver through a 3 per cent government contribution made on their behalf on top of their current benefit.
The Government largely parked its response to the recommendations in 2020 due to Covid-19.
But the Ministry for Business Innovation and Employment has been conducting a wide-ranging consultation on KiwiSaver this year.
In June, MBIE told the Herald that officials were looking to prepare advice to ministers on the recommendations from the Retirement Commissioner’s Report from 2019.
“A government response is due this year. This includes identifying recommendations which need more detailed consideration.”
The Herald has requested more detail from both MBIE on its consultation and any recommendations to the Government and the minister on what contributions changes could be in the works.
Clark told the conference he was focusing on a number of other projects to create better outcomes for consumers.
“This includes consulting on buy-now pay-later services to gain a better understanding of the emerging landscape and find out how these products could trigger financial hardship for some consumers. From there we can see whether regulation is needed for these products.”
He also mentioned the establishment of a consumer data right framework to allow consumers to securely share data about themselves with trusted third parties including financial institutions.
Clark said the Government recognised that legislative changes on the scale that had been seen recently resulted in substantial organisational change for the finance industry.
“I’m acutely aware of that and acknowledge the challenges this presents to many of you, particularly during the pandemic. I want to assure you the Government will be keeping these challenges and pressures in mind when planning future work programmes.
“Please continue to reach out to me and my officials with any concerns and please continue to provide submissions.”
He reminded the industry of the need to build consumer trust and confidence in financial services.
“You as the financial services industry can make a huge difference to the financial wellbeing of everyday New Zealanders. Together let’s build a better financial future for the generations of today and tomorrow.”