Latest / Best of Business / Michelle Rayer: Retirement Commission policy lead on the Commission calling for higher KiwiSaver default contribution rates

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Michelle Rayer: Retirement Commission policy lead on the Commission calling for higher KiwiSaver default contribution rates · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed B.
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  Speaker 2: Simi and Brown is with us actually ten past five
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  Speaker 2: on mat now. The Retirement Commissioner has made a series
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  Speaker 2: of recommendations for changes to key we saber. The analysis
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  Speaker 2: has recommended default contribution rates should go from where they
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  Speaker 2: are right now, which is three percent to four percent,
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  Speaker 2: with employers being required to match at that level, but
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  Speaker 2: the Commission stopped short of recommending key we saber be
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  Speaker 2: made completely compulsory. Michelle Rayes is the policy lead at
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  Speaker 2: the Retirement Commissioner. Commission Rather Heimerschelle hi Herbert. Why not compulsory?
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  Speaker 3: Well, I think the evidence shows us that it's not
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  Speaker 3: really necessary. We've got very high levels of membership, the
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  Speaker 3: scheme's being very effective in getting people to join, and
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  Speaker 3: when we look at contributing members we see that almost
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  Speaker 3: all of the people who are in paid employment are
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  Speaker 3: actually contributing already, So compulsion isn't really necessary.
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  Speaker 2: Really, what proportion of people in paid employment are are
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  Speaker 2: contra better?
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  Speaker 3: Well, those that are paid employees, so those are wage
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  Speaker 3: and salary earners. About ninety percent of them are actually
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  Speaker 3: currently contributing to the scheme, and when we look at
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  Speaker 3: more broadly as the population that include self employed, it
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  Speaker 3: dropped to about eighty percent.
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  Speaker 2: And why not make it compulsory to scoop up that
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  Speaker 2: last ten percent?
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  Speaker 3: Well, I think that there are downfalls to forcing people
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  Speaker 3: to say, you know, some people on very low incomes
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  Speaker 3: will actually not necessarily be better off if they give
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  Speaker 3: up current well being for some future time period. So
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  Speaker 3: we just want to give a little bit more flexibility
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  Speaker 3: to people to make their own decision.
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  Speaker 2: Obviously, we don't go you know, you don't have to
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  Speaker 2: make it compulsory for the worker, but you can make
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  Speaker 2: it compulsory for the employer. Why not do that?
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  Speaker 3: Yeah, so that's one of the things that we do
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  Speaker 3: think some consideration should be given to. We know that
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  Speaker 3: in other jurisdictions, you know, employer contributions are compulsory. So
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  Speaker 3: that's something that we have recommended that the government might
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  Speaker 3: give consideration too.
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  Speaker 2: Why not call for it?
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  Speaker 3: Suppose there's always one needs a bit of a broader
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  Speaker 3: analysis before you make these kind of calls, because there
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  Speaker 3: are broader economic impacts that come out of compulsory settings
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  Speaker 3: like what they can impact on wage levels generally within
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  Speaker 3: their economy, sometimes the economic productivity. So there's broader issues
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  Speaker 3: at play. They used to be technife.
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  Speaker 2: I mean, for example, if you force an employer to
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  Speaker 2: make a key we save a contribution on behalf of
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  Speaker 2: the employee, they may in fact dock the employee's pay.
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  Speaker 3: Yeah, that is one of the scenarios that can result.
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  Speaker 2: Right, am I right in thinking that the employer over
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  Speaker 2: in Australia has to put something like eleven percent in
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  Speaker 2: for the worker.
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  Speaker 3: Yes, that's correct. Yeah, they've been increasing their contributions over
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  Speaker 3: the past number of years. I think it is currently
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  Speaker 3: at about a nine percent.
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  Speaker 2: So why don't we get real? I mean, we're talking
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  Speaker 2: here about raising it from three to four percent. That's
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  Speaker 2: tically winks when you're comparing it to eleven percent or
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  Speaker 2: over in Australia, those guys are loaded. Shouldn't we be
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  Speaker 2: doing the same as them?
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  Speaker 3: Well, I think that's the first thing to notice. When
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  Speaker 3: you say four percent would be with a four percent
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  Speaker 3: employer match, so it's actually an eight percent contribution we're
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  Speaker 3: talking about. And the other thing to remember is that
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  Speaker 3: New Zealand's quite different from Australia. Because we have New
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  Speaker 3: Zealand Super, so that is a universal pension payment which
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  Speaker 3: isn't in place in Australia. So in a way, people
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  Speaker 3: won't have to save as much out of their current
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  Speaker 3: income because of the fact that New Zealand Super is
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  Speaker 3: available to them as retirement income stream.
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  Speaker 2: Yeah, fair point. Hey, are you worried about our savings culture?
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  Speaker 2: I mean, how on earth have we got people who
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  Speaker 2: in some cases only got one hundred bucks in their
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  Speaker 2: bank account at the end of the month.
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  Speaker 3: Yeah, I think, you know, that is concerning. I think
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  Speaker 3: that probably is a bit of a function of the
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  Speaker 3: current economic climate that we're in at the moment. But yeah,
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  Speaker 3: it is something that concerns us just generally savings culture.
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  Speaker 3: It's something that we, you know, are pushing for people
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  Speaker 3: to come think about their future selves when they make
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  Speaker 3: decisions about current spending as well. But it is a
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  Speaker 3: concern more generally is I.
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  Speaker 2: Mean, Michelle, there's not a lot you can do. If
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  Speaker 2: somebody is just you know, living kind of paypack it
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  Speaker 2: to paypack it, that is what will happen, and you know,
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  Speaker 2: you just hope for the best for them. But do
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  Speaker 2: we have examples of people who are actually on a
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  Speaker 2: reasonable wicket who still don't save.
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  Speaker 3: Yeah, Unfortunately, we don't have quite that level of what's
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  Speaker 3: a this aggregation and the data or the ability to
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  Speaker 3: break down to have a look at those kind of
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  Speaker 3: levels of analysis, So we're not one hundred percent sure
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  Speaker 3: of that at the moment, but there probably are, you know,
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  Speaker 3: instances where people aren't necessarily saving as much as they should.
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  Speaker 3: I think the beauty of kiwisaver is how it works
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  Speaker 3: as an opt out system and the default settings. All
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  Speaker 3: of that helps play into the behavioral factors that we
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  Speaker 3: know are at play when people save. So we know
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  Speaker 3: that keV savers working quite well then in capturing people
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  Speaker 3: who otherwise might not be saving just because of things
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  Speaker 3: like you know, procrastination and inertia. So people get into
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  Speaker 3: the schema, they don't opt out of it. So that's
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  Speaker 3: a good outcome in terms of people for saving for
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  Speaker 3: their future selves.
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  Speaker 2: Michelle, thank you very much, really appreciated this. Michelle Rayer
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  Speaker 2: of the Retirement Commission.
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