The government and financial sector groups need to take a broad approach to changing and improving KiwiSaver to get the most out of the scheme in the decades ahead, according to a new report.
The Government has canned the $1000 KiwiSaver kickstart programme. Photo: 123RF
The Financial Services Council's KiwiSaver 2050 paper said KiwiSaver needs more members and incentives to encourage them to join, a higher level of savings, while the investors also need new options such as annuities.
Council chief executive Richard Klipin said there are practical changes which could be made to improve the attractiveness and effectiveness of KiwiSaver.
"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," he said.
He said by 2050 KiwiSaver would have more than $900 billion of investments, and there needed to be work done on how retirees would draw on their savings - known as decumulation - to supplement the state-provided pension.
The lack of an annuity market is seen as a significant gap in retirement saving options. Annuities offer guaranteed retirement payments for life even if the savings they are based on are run down.
They are not widely offered in this country, and Jeremy Cooper, an executive in Australia's biggest provider, Challenger, said law changes and a bigger market were needed.
"Currently there is a slight tax wrinkle with annuities [in New Zealand]. The tax is taken out at a corporate level and therefore they are not as attractive."
Among the report's other suggestions are putting in some form of insurance so that contributors falling ill or injured would still be covered.
"There is a great opportunity to think about what other incentives may be used to help people increase their contributions, perhaps change their investment options," Mr Klipin said.
The report suggested creating a political accord and dedicated ministry for retirees.