KiwiSaver

KiwiSaver providers want more clarity on how total remuneration packages will be treated with any move towards compulsion.

National said on Sunday that, if re-elected, it would make KiwiSaver contributions compulsory from 2028, and move to a 12% contribution by 2032.

Koura founder Rupert Carlyon said that would be a significant increased burden on people with total remuneration packages, who are currently funding contributions of 7%.

“Personally I think total rem has got to go.”

Pie Funds chief executive Ana-Marie Lockyer had a similar concern.

“As KiwiSaver moves toward a compulsory model understanding how employer contributions will be treated within remuneration packages will be important for both employers and employees.  In addition, the principle of helping more people save is sound, but the implementation details around hardship exemptions, contribution suspensions and support for lower-income households will be important to get right.”

Booster cheif executive Diana Papadopoulos says "proposed higher contributions from both employees and employers would make an even bigger difference to grow the future wealth of New Zealanders, but the issue of total remuneration arrangements needs to be addressed."

"If they’re not used appropriately it can have a really negative impact on people who will miss out on the contributions they deserve."

The Retirement Commission estimates 45% of employers use a total rem arrangement for at least some of its employees.

Kernel founder Dean Anderson agreed the government needed to look at total remuneration agreements. He said it would not be practical for people to lose up to 12 percent of their salary in contributions.

Matt Mackpherson, Sharesies general manager of funds, said it was not clear whether National’s plans included an end to total rem. “These packages go against the spirit of KiwiSaver and employees who receive these packages are not protected by law when minimum contribution levels increase.”

Polling for Simplicity had shown support for compulsion, but economist Shamubeel Eaqub said that was on the basis that it was the employer contributions that were made compulsory.

“My preference would be to make the employer contribution compulsory, keep the employee contribution voluntary and unlink the two.”

KiwiSaver advisers who are reviewing their clients’ investments on an annual basis probably aren’t serving them as well as they could, the founder of an AI business says.

Clive Fernandes is director of Sevaka, which provides AI support for financial advisers. He also established advice firm National Capital.

He said annual reviews had never been best for clients. “The proof of that is the fact that clients haven’t been responding to the call from advisers to get financial advice.

“There has to be another reason other than clients don’t care about their own financial lives. I believe the reason is that we just don’t have the system set up correctly to give clients what they actually need. Right now advice is given on the adviser’s timeline rather than the client’s timeline. Just because a client happened to speak to me for the first time on December 24th, doesn’t mean every year the client’s available on December 24th.”

He said a better option was to try to speak to clients at the points they needed advice.

“The problem with that of course is how do we know when the client needs to speak to us? I Don’t think that’s a problem I’d have had an answer to if we were having this phone call a few years back but now we do,” he said. “Now we have an answer and the answer is to look at the data.”

He said a KiwiSaver adviser should be able to see the KiwiSaver transactions their clients were making, and then use AI to highlight anything that could mean a life change.

“A simple example is KiwiSaver contribution – if the amount has changed I could deduce from that whether it reflects a change in the client’s income. They could still be on 3 percent but now 3 percent of a higher income is a higher amount. Based on that if I was going to reach out to he client not with like ‘book an appointment with an adviser’ but with ‘we’ve noticed this… what are you doing with that extra income?’”

He said it was the approach he suggested to advisers.

“We’re running a technology company that could enable all of this. Rather than them send their client data to us, the system is set up within the confines of the FAP itself. As per the policies and agreements that our advisers have with their clients, they process the client’s data to give them the kind of advice I think clients have always  needed.

"I think they’re going to want even more and more going into the future just because the technology and the capability now exists.”

Fernandes said he expected consolidation in the industry which would allow adviser businesses to invest more in technology. “Most advisers are like ‘I’d love to do it. I have no idea how and I’m currently working 40 hours in my business so I just don’t have the time to look into that. That is a struggle that I guess small business owners have had for a long time.”

National is proposing a range of changes to KiwiSaver if it returns to power, including making the scheme compulsory.

Leader Christopher Luxon said on Sunday that the party was proposing to enrol every child born in New Zealand into KiwiSaver from birth, as of July next year, with a $1,500 kickstart.

Everyone would be required to be contributing to KiwiSaver or an equivalent scheme from July 2028 and would only be able to suspend contributions if they met the criteria currently used for a hardship withdrawal.

It would also make an employer contribution for people on paid parental leave, whether they contribute or not. At the moment, people must contribute to qualify.

“For a stay-at-home mum or dad with two kids, their retirement savings could be around $15,000 larger by the time they reach 65, thanks to this change in policy,” Luxon said.

He said the party would also require employers to continue to make contributions for employees who are over 65.

“Right now, the day you turn 65, your employer can stop contributing to your KiwiSaver. That’s not right, and it’s out of step with how Kiwis actually live and work today. So, that’s why National will require employers to keep contributing to KiwiSaver for workers over 65. Just because you’re 65 doesn’t mean it’s time to stop saving for your future, and it doesn’t mean it’s time for your employer to stop supporting you in that mission either.”

The party would also lift contribution rates to 12% by 2032.

The Financial Services Council welcomed the announcement. It said it would strengthen New Zealanders’ long-term financial resilience and close gaps in the system.

"KiwiSaver is one of the most practical tools New Zealanders have to build long-term financial resilience," chief executive Kirk Hope said.

"These proposals recognise that saving needs to start earlier, reach more people and continue through the life stages where people can otherwise fall behind."

Simplicity chief economist Shamubeel Eaqub said it was a positive direction for the conversation about KiwiSaver to take. He said earlier research by Simplicity showed that people were supportive of these sorts of changes.

Eaqub said it was clear that KiwiSaver was shaping up to be a key issue in this year’s election. NZ First has already revealed it would make the scheme compulsory.  “It feels like it’s a KiwiSaver election in the sense that it’s not just National. Everybody’s got some ideas on KiwiSaver. In the past it was the left wanting to improve KiwiSaver and the right wanting to denude KiwiSaver. Now it’s kind of become a more universal thing that we want KiwiSaver to be stronger, so we have choices in the future.”

A new fund finder tool is designed to offer a more user-friendly way for people to compare their KiwiSaver options.

Hugo Kidd is developing Find My Fund to offer a comparison of fund performance after fees.

He said the idea came about when he was studying his Level 5 qualification investment strand.

“I kind of came to the realisation that a lot of people are worse off with their retirement at the moment… people in the wrong fund types or wrong actual fund itself.

“Searching online, I couldn’t really find a platform that can first of all be independent and also just user-friendly to track all the KiwiSaver funds.”

He said the tool would act as a sort of leaderboard to see how funds were performing over various time periods and against their category average.

“I've done a proven performer [measure], which is a time period, but then against their fund type, and then the average or the category average. And then has that fund hit the category average every year?… Then the category average over five years, and then the fund's performance over the five years, and it can show the difference. And it’s something quite staggering, really, because it could be, 30%, and then this one's 60%.

“So, it's really important for people to talk to an adviser or provider and make those changes, make sure they're in the right funds, because it does add up over the long term.”

He said people were often not getting enough financial advice around their decisions.

“People in New Zealand don’t really get financial advice and there isn’t really an advisory hub where people can go and search for advisers and filter it out… that’s another component to the platform. Then another main part of the business is just providing content through social media and marketing to make Kiwis take action, essentially, with KiwiSaver.”

He said advisers had a role to play in KiwiSaver providing consistent advice. “People get advisers so they can have that human touch… I’ve got an adviser and I like it because I can text or call them any time. It’s the same person instead of if you’re with a provider – unless you’re with an adviser from the provider – you’re just talking to someone new every time… it’s just having that personal touch and reassurance.”

He said he had been building the platform alongside his full-time job and hoped to have it ready to take to market in a month or so.

Kidd said he planned to expand it into managed funds beyond KiwiSaver in future.