Tax breaks needed to boost savings: Milford

Milford Asset Management chief executive Troy Swann said savings was a politically sensitive issue. He said New Zealand’s household savings rate had been negative for the past several years, compared to a rate of 4.6% in Australia.

“As a matter of urgency, New Zealand needs to lift its savings rate. Before he became Finance Minister, Grant Robertson said he wanted to see KiwiSaver minimum contribution rates lifted from 3% to 4.%. The problem here is that many Kiwis are already very stretched financially and cannot afford to contribute more.

“A more effective way to encourage people to save more, Milford considers, would be to incentivise them to do it. For example, allowing people to make tax-deductible contributions, capped at a certain amount each year, to their KiwiSaver account. Whilst still allowing them to contribute over and above the annual cap on a non-tax-deductible basis.

"Currently the median New Zealander is earning about $49,000 p.a. yet anyone earning over $35,000 p.a. has no tax incentive to save more than 3% to their KiwiSaver account. Australia, the US, the UK and Canada all have stronger forms of tax incentives to encourage extra retirement savings – and all these countries have higher savings rates than New Zealand.”