Missed the boat? Not yet

It's too early to talk about New Zealand having 'missed the boat' on setting up decumulation options for KiwiSaver, commentators say.

Friday, May 3rd 2019, 6:00AM

Retirement policy researcher Susan St John said last week that New Zealand had missed its chance to introduce a default government-backed annuity option alongside KiwiSaver when the scheme was created.

But a spokesperson for Commerce and Consumer Affairs Minister Kris Faafoi rejected that.

“KiwiSaver balances at retirement are growing and now people are retiring with larger balances than before. An assessment of decumulation in retirement savings and assets, including how the Government can ensure New Zealanders make the most of their money in the decumulation phase will be considered as part of the 2019 retirement income policies review.”

A spokeswoman for the Commission for Financial Capability said it had commissioned research on decumulation issues and options, and the idea behind St John’s KiwiSpend proposal would be among them.

“Our review team and the new Retirement Commissioner will consider the research results, and input from other areas, before forming recommendations for the final retirement income policy review report.”

Ralph Stewart, who offers a variable annuity through Lifetime Retirement Income, said it was hard to imagine a government wanting to commit any more money on top of the existing superannuation burden to support people in retirement.

But he said there could be ways that government could work with private providers.

David Boyle, former group manager of investor education at the Commission for Financial Capability and now with Mint Asset Management, said a national annuity option could be one of a range of options.

But he said he did not think “the boat has sailed out yet” because balances were still generally below the level needed for a decumulation product.

He said any annuity should be part of a diversified portfolio.

Most KiwiSaver providers allowed for regular withdrawals to help people manage their money in retirement, he said.

But he said it was a good debate to have that needed public and private co-operation to discuss what options could be developed to cater for different circumstances.

“Not just ‘we’ll build the product and they’ll come’ because that doesn’t work.”

Tags: annuities decumulation Ralph Stewart