MEDIA RELEASE (NZ)

“For many New Zealanders, these KiwiSaver contribution changes will deliver medium-term pressure on take-home pay, but they also increase retirement savings in the long-term,” says CA ANZ NZ Country Head Peter Vial FCA.

“KiwiSaver is now the second biggest asset for many people, behind the equity in their home. These changes are a timely reminder not just to save more, but to check whether your overall KiwiSaver settings are aligned with the retirement goals.”

“Younger workers should consider whether they’re in growth options that suit a longer time horizon, while those closer to retirement need to ensure they’re protecting the savings they’ve built up over a lifetime.”

“Savers should use an online calculator to understand how much they will save by their mid-60s, and whether they will realistically meet their retirement expectations.”

“There is an option to temporarily remain at 3 per cent for a period of three to 12 months, which can be rolled over. But the reality is that the earlier you save, the greater the compounding effect over time.

It’s also vital to save because there is no guarantee NZ Super retain its current settings for future generations,” said Mr Vial

NZ Super affordability

According to The Treasury, New Zealand Superannuation currently costs around 5.1 per cent of GDP. Under current settings it is projected to rise to around 8 per cent by 2065.

“The affordability of NZ Super is challenged by our ageing population and our overreliance on income tax, which contributes more than 50 per cent of our tax base."

The ratio of working-age people to retirees drops from 4 to 1 now, to around 2 to 1 by 2065. That makes NZ Super, in its current form, vulnerable to political and fiscal pressure.”

“There are however multiple levers available when it comes to addressing our superannuation and retirement challenges.”

Options for better policy

“CA ANZ believes there is more that can be done to incentivise retirement saving, including reviewing the tax treatment of savings and contributions."

“Many countries provide more favourable tax settings for retirement saving, and that conversation should be part of New Zealand’s long‑term tax reform agenda.”

“Enabling ‘salary sacrifice,’ could be an option, where employee contributions are paid prior to tax being deducted from the income. That alone could materially lift retirement savings over time.”

“Making NZ Super more affordable for the country will require a range of policy levers."

“Options include changes to indexation settings or introducing more flexible retirement age choices that are cost‑neutral and work alongside stronger private savings.”

“We could also look at optional retirement ages. For example, a retiree could choose a reduced rate if they retired between 60 and 64 and an increased rate if they choose to retire between 66 and 70. It would be cost neutral and most workable if accompanied by private retirement saving.”

“Overall, better tax settings are needed to help address our demographic challenges and overreliance on income tax. That will require an ongoing conversation about what we tax and how we tax it, including income, corporates, capital and goods and services."

“It’s vital that we get the right tax mix to support the New Zealand we all aspire to,” concluded Mr Vial.