Dr Michelle Reyers: Retirement Commission policy lead on the Commission calling for higher KiwiSaver default contribution rates

The Retirement Commissioner has released a list of proposed changes to improve the KiwiSaver scheme.

The list suggested the default rate for KiwiSaver contributions needs to rise to 4 percent, with employers being required to match that level.

However, the Commission disagreed that KiwiSaver should be compulsory.

Retirement Commission policy lead Dr Michelle Reyers says 90 percent of wage and salary earners already contribute to the scheme.

"There are downsides to forcing people to save - some people on very low incomes will not necessarily be better off if they give up current wellbeing for some future time period."

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Episode Transcript

Speaker 1 (00:00):
Heller Duper see Ala Simon Brown is with us actually
ten past five on that. Now, the Retirement Commissioner has
made a series of recommendations for changes to key we saver.
The analysis has recommended default contribution rates should go from
where they are right now, which is three percent to
four percent, with employers being required to match at that level,
but the Commission stopped short of recommending key we saber

(00:21):
be made completely compulsory. Michelle Rayes is the policy lead
at the Retirement Commissioner. Commission rather Heimershelle hi Herbert. Why
not compulsory?

Speaker 2 (00:31):
Well, I think the evidence shows us that it's not
really necessary. We've got very high levels of membership. The
scheme's being very effective in getting people to join, and
when we look at contributing members we see that almost
all of the people who are in paid employment are
actually contributing already, So compulsion isn't really necessary.

Speaker 1 (00:48):
Really, what proportion of people in paid employment are are
contributed Well.

Speaker 2 (00:53):
Those that are paid employees, so those are waging salary earners,
about ninety percent of them are actually currently contributing to
the scheme. And when we look at more broadly as
the population that includes self employed that dropped to about eighty percent.

Speaker 1 (01:05):
And why not make it compulsory to scoop up that
last ten percent?

Speaker 2 (01:10):
Well, I think that there are downfalls to forcing people
to say, you know, some people on very low incomes
will actually not necessarily be better off if they give
up current well being for some future time period. So
we just want to give a little bit more flexibility
to people to make their own decision.

Speaker 1 (01:27):
Obviously we don't you know, you don't have to make
it compulsory for the worker, but you can make it
compulsory for the employer. Why not do that?

Speaker 2 (01:36):
Yeah, So that's one of the things that we do
think some consideration should be given to. We know that
in other jurisdictions, you know, employer contributions are compulsory. So
that's something that we have recommended that the government might
give consideration too.

Speaker 3 (01:48):
Why not call for it, as I suppose, there's always
one needs a bit of a broader analysis before you
make these kind of calls, because there are broader economic
impacts that come up of compulsory settings, like what.

Speaker 2 (02:04):
They can impact on wage levels generally within their economy,
sometimes the economic productivity, so there's border issues at play.
They needed to be technique.

Speaker 1 (02:14):
I mean, for example, if you force an employer to
make a key, we save a contribution on behalf of
the employee, they may in fact dock the employee's pay.

Speaker 2 (02:22):
Yeah, that is one of the scenarios that can result, right.

Speaker 1 (02:26):
Am I right in thinking that the employer over in
Australia has to put something like eleven percent in for
the worker.

Speaker 2 (02:33):
Yes, that's correct. Yeah, they've been increasing their contributions over
the past number of years. I think it is currently
at about a leven percent.

Speaker 1 (02:38):
So why don't we get real? I mean we're talking
here about raising it from three to four percent. That's
typically winks. When you're comparing it to eleven percent or
over in Australia, those guys are loaded. Shouldn't we be
doing the same as them?

Speaker 2 (02:48):
Well, I think that's the first thing to notice. When
we say four percent, that would be with a four
percent employer match, so it's actually an eight percent contribution
we're talking about. And the other thing to remember is
that New Zealand's quite different from Australia because we have
New Zealand Super so that is a universal pension payment
which isn't in place in Australia. So in a way

(03:09):
people won't have to save as much out of their
current income because of the fact that New Zealand super
is available to them as retirement income stream.

Speaker 1 (03:16):
Yeah, fair point. Hey, are you worried about our savings culture?
I mean, how on earth have we got people who
in some cases only got one hundred bucks in their
bank account at the end of the month.

Speaker 2 (03:27):
Yeah, I think you know, that is concerning. I think
that probably is a bit of a function of the
current economic climate that we're in at the moment. But yeah,
it is something that concerns us just generally savings culture.
It's something that we, you know, are pushing for people
to come think about their future selves when they make
decisions about current spending as well. But yeah, it is

(03:48):
a concern more generally.

Speaker 1 (03:50):
I mean, Michelle, there's not a lot you can do.
If somebody is just you know, living kind of paypack
it to pay pack it, that that is what will happen,
and you know, you just hope for the best for them.
But do we have examples of people who are actually
on a reasonable wicket who still don't save.

Speaker 2 (04:06):
Yeah, Unfortunately we don't have quite that level of what's
a this aggregation and the data or the ability to
break down to have a look at those kind of
levels of analysis. So we're not one hundred percent sure
of that at the moment, but there probably are, you know,
instances where people aren't necessarily saving as much as they should.
I think the beauty of kiwisaver is how it works

(04:27):
as an opt out system and the default settings. All
of that helps play into the behavioral factors that we
know are at play when people save. So we know
that keV saver's working quite well then in capturing people
who otherwise might not be saving just because of things
like you know, procrastination and inertia. So people get into
the schema that don't opt out of it. So that's

(04:49):
a good outcome in terms of people saving for their
future self.

Speaker 1 (04:53):
Michelle, thank you very much, really appreciated as Michelle Rayer
of the Retirement Commission. For more from hither, see Allen Drive.
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