Sam Dickie: Fisher Funds expert on the KiwiSaver changes included in Budget 2025

An increase in default KiwiSaver contribution rates announced in Thursday's Budget could leave some households better off for retirement - but experts warn not everyone will benefit.

The Government will halve the member tax credit available to people who contribute at least $1042 in a year to $260.72.

Fisher Funds expert Sam Dickie explains further. 

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Episode Transcript

Speaker 1 (00:00):
So we've got some burg changes coming to your Key
we Save A. Government is increasing the minimum contribution rate
for employees and employers, or the default rather, from three
percent to four percent. But at the same time it's
taken out, it's basically having its own contribution rate and
if you're earning too much money, you can get nothing
at all. Sam Dickey from Fisher Funds is with us.

Speaker 2 (00:17):
A Sam good evening.

Speaker 1 (00:19):
So what I'm well, thank you, So what do you
make Let's start with the default rate going from three
to four percent. What do you think?

Speaker 2 (00:26):
I think it's exciting. It's exciting generally that we're paying
this much attention to something as critical as key's retirement savings.
And that is a step in the right direction. So
we've gone from three percent to four percent. It's not
compulsory like it is in Australia, but it's a step
in the right direction. And as you know, what becomes
compulsory is if the employee does elect to put four
percent or contribute four percent of the key we save it,

(00:48):
then it's compulsory that the employer matches it. And the
other thing is that a step in the right direction.
I'm sure my thirteen and fifteen year old sons will
be delighted as the extension of the eligibility of the
government contributions to six seventeen year olds.

Speaker 1 (01:01):
Does it mean your sons have to get jobs in
order to qualify for that?

Speaker 2 (01:06):
That's music to my ears. I hope that's the case.

Speaker 1 (01:09):
I love what we're doing here. What do you make
though off the government harving its contribution for lower earners
and then cutting off the one to eighty thousand plus.

Speaker 2 (01:18):
I think balancing the books is important, and that's part
of what they're trying to do there, But it's not
clear to me how harving of the government's contribution sends
the right signal to save us. And when you compound
two undred and fifty bucks for forty seven years, so
say from the age of eighteen to the age of
sixty five, at market returns of say seven percent, it
comes to sort of sixty five to seventy thousand, which

(01:39):
is a big number. Having said that, they've come all
away from matching US dollar for dollar to matching US
twenty five cents on the dollar. So it's pretty clear
the direction of travel and.

Speaker 1 (01:49):
Do you believe the direction of travelers? The next move
is nobody gets a government contribution at all.

Speaker 2 (01:55):
I'm not sure about that. Like if you look around
the world, in Australia there is still government contributions for
low and earners. And I do think it does send
a signal to savers. And I do think that you know,
the power of compounding is real. And when you consider
the average key we say a balance today in New
Zealand is less than forty thousand dollars, That two hundred
and fifty dollars matters for an eighteen year old. That's

(02:16):
seventy thousand dollars compounded up over forty seven years. So
I do think the signaling matters.

Speaker 1 (02:22):
And over in Australia, at what point, what is the
income threshold before the government doesn't give you anything? At
what point are they still giving you money?

Speaker 2 (02:33):
Oh, I'm going to have to I mean, I imagine
that one.

Speaker 1 (02:34):
Because it must be lower than it is here, Sam,
one hundred and eighty thousand dollars is a reasonable whack.

Speaker 2 (02:40):
Yes, that's right. So what's that three to four percent
of New Zealanders and over that amount and they're no
longer eligible for the two hundred and fifty dollars of
government contributions.

Speaker 1 (02:49):
Which means they're not like ninety six percent of us
are eligible.

Speaker 2 (02:53):
That's right, we're eligible for the two hundred and fifty dollars,
and now our sixteen and seventeen year olds are eligible
as well. Now, so they take it from the one
hundred and eighty thousand dollars earners and they give it
to our young leaders of tomorrow.

Speaker 1 (03:08):
I guess yeah, which is fair enough. But I mean,
if what you're trying to do is sort of you know,
I don't know. I mean, I just think I probably
would have come tested at a lower level. But anyway,
I mean what you were looking for here, which is
more important, as you were looking to see a bit
of a long term roadmap, right, are you having to
I mean I don't. I don't think you got that.
So are you having to kind of fill it in
by filling in the blanks?

Speaker 2 (03:29):
I think so. I mean we would love I'm sure
we and employers and savers in other words, kiwis would
love to have seen a ten year roadmap and so
they can all easily make a plan. And what I
mean by that is a plan on how to close
the yawning gap between the average kiis have a balance
of approximately forty thousand dollars and the six hundred and
fifty thousand. Now, that's the midpoint of the range of

(03:52):
a massive university study that on average a couple needs
a retirement and that, by the way, here, that's assuming
they already living in a mortgage free house. So that's
a yawning gap between the forty thousand dollars ballance today
and six hundred and fifty thousand dollars. And I think
that needs long term planning, in a long term roadmap.

Speaker 1 (04:09):
Like you say, yeah, hey, Sam, thank you. Always appreciate
talking to you, mate, Appreciate your expertise at Sam dickey
Official Funds.

Speaker 2 (04:15):
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