Expect to see Kiwisaver next week
Next week is looking like the big week for details of the Kiwisaver scheme. Good Returns understands that cabinet have approved the legislation relating to Kiwisaver and it will be introduced into parliament next week.
Friday, February 24th 2006, 7:18AM
Nick Hillman, who is a policy adviser for the Association of British Insurers says that Kiwisaver appears to be a well thought-out scheme.
One of the key things that emerged from the session is that the default option for people in scheme may be a cash account.
Under Kiwisaver employees who opt-in have to select a savings scheme. If they don’t select anything there needs to be a default option.
Hillman says it appears officials are favouring a cash account as the default option.
One of the reasons behind this is that it is important people who use the scheme see their savings grow.
Hillman says the pluses of Kiwisaver are the auto-enrollment element, the government kick-start and the state’s contribution to fees.
On the downside employers do not appear to be well-served and it is difficult to see what incentive there is for them. Likewise he wonders whether there should be a compulsory employer contribution.
A difference between New Zealand and the UK is that in the UK people are forced to take an annuity when they get their pension, rather than a lump sum.
Hillman also says it is hard to see where advisers fit in, although there maybe a role helping employers implement schemes then providing advice to staff. One part could be to encourage people who sign up to increase their contribution rate from 4% to 8%.
Hillman also said there was a lot of interested in the United Kingdom to the role the Retirement Commissioner plays in the superannuation industry and to the way the state pension is run in New Zealand.
He says New Zealand’s scheme is very simple compared to the UK one which is complicated and the level of pension is determined by a number of factors including how long someone has been in the workforce.
“Nobody has the faintest idea when they retire how much they are going to get,” he says.
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