22 October 2019
Will KiwiSavers be denied control of their savings?
In the Government’s triannual review of Retirement Income Policy, Auckland University’s Retirement Policy and Research Centre has recommended the introduction of KiwiSpend, a new scheme that would deny investors in KiwiSaver access to their savings when they reach age 65.
Instead they would be defaulted into a Government-regulated annuity scheme, providing a regular income in retirement. KiwiSavers would have the option to opt out of the scheme only if they sought financial advice.
Ralph Stewart, Founder and Chief Executive of Lifetime Retirement Income (Lifetime) expressed deep concern at the proposal.
“The accumulated saving of KiwiSavers belongs to KiwiSavers not the Government. Suggesting savings could be automatically redirected at age 65 has the potential to destabilise the confidence that has been earned by the KiwiSaver scheme.
A key element of the KiwiSaver scheme which was set up under the PIE rules, was to allow each and every KiwiSaver to have their own individual savings account to do with as they wish when they reach retirement.”
Mr Stewart said, “while there is very real gap between New Zealand Superannuation and an acceptable level of retirement income for many New Zealanders, the answer is not forcing savers to accept a regular income. Instead, the answer lies in providing simple retirement income options. Ultimately lifestyle in retirement is a personal choice and should never be imposed on KiwiSavers.
The model already exists today in the way in which KiwiSaver providers offer multiple investment options, all the providers have to do is provide multiple retirement income options that members can accept or reject when they retire. There is no need to force KiwiSavers into a government owned schemed that they have to opt out of.”
In Australia the Governments My Retirement frame work (2018) has been developed which requires KiwiSaver equivalent providers to offer retirement income options in their superannuation schemes. There is no default option imposed. The only obligation is for providers to make options available to members to use as they see fit for their individual circumstances.
After responding to an application from the company Mr Stewart established in 2012 - the Reserve Bank of New Zealand developed the minimum standards for providing a guaranteed retirement income in New Zealand. The standards have been set within the New Zealand regulatory frame work. The standards can be accessed by all KiwiSaver providers making the provision of retirement income options for their members a simple and straight forward option.
Simplicity KiwiSaver is already providing these options to members as part of a comprehensive low-cost scheme that will support members while both saving for retirement and spending in retirement. The Simplicity scheme offers members both low cost savings options and one of the lowest cost guaranteed income options in the OECD.
Mr Stewart said, “ KiwiSaver is a fantastic scheme that helps Kiwi’s accumulate a savings balance to support individual retirement options. To reduce these options or to enforce income options is simply not KiwiSaver.”
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