The easiest change to KiwiSaver would be to stop employers from putting KiwiSaver contributions into a person’s total remuneration package, the founder and managing director of a KiwiSaver scheme says.

So instead of receiving your employer contribution as part of your salary, it would be on top of your salary.

Speaking on a panel at the Financial Services Council Conference last week, founder and managing director of Kōura Wealth Rupert Carlyon said: “That is probably the biggest driver of inequity of all in KiwiSaver.”

Carlyon said 40% to 45% of employers have this in their contracts.

This means for most people, now that the maximum government contribution has gone down to about $260, “the incentive is close to nil”, he said.

‘Not how KiwiSaver is designed to operate’

In 2023, a Retirement Commission survey which involved 306 organisations, found 45% use a total remuneration approach. Of those, 60% said it was simpler and 21% said it was cheaper.

At the time, Retirement Commissioner Jane Wrightson​ said: “This is not how KiwiSaver is designed to operate, as the legislation clearly states that compulsory contributions must be paid on top of gross salary or wages except to [the] extent that parties otherwise agree.”

But it was not legislatively prohibited, “so long as the outcome is the result of good faith bargaining”, Wrightson said.

‘The panacea is the Australian system’

Carlyon said he thought everyone in the room would agree that the panacea is the Australian system.

“It’s compulsion and increasing contribution rates to that 12% to 14% which is where we know it needs to be to be self-sustaining.”

“We can’t have compulsion without an incentive,” Carlyon said, and in New Zealand “there is almost no incentive for individuals to have their money locked up until they’re 65”.

“What the Australians have done to pay for it is a simple means testing on superannuation in Australia. That’s how they’ve got a model which is consistent at 4.5% of GDP and you can rely on the super payments plus the incentives, and that’s the model that we need to go [to].”

While it was nice to hear about “the fist and glove” of superannuation and KiwiSaver, Carlyon said, “we can’t afford to provide incentives unless we move pretty quickly to make changes to superannuation”.

Politics

During a question and answer session at the Financial Services Council Conference last week, Labour’s finance spokesperson Barbara Edmonds brought up total remuneration packages.

Labour had previously had a Bill in the House about this, Edmonds said.

When asked if conversations were had with other political parties whether the remuneration package needs to be looked at, Edmonds said she thought it was part of the discussion that needs to be had.

Edmonds said she was conscious that businesses did total remuneration packages because it was more affordable.

“It’s not just around age or contribution or how you pay for it. You have to look at the full consequences of it.”

At the same conference, Finance Minister Nicola Willis said National would be going into next year’s election with a superannuation and savings policy that it believes addresses some challenges New Zealanders face.

“KiwiSaver has to be part of that,” Willis said.

Meanwhile New Zealand First leader Winston Peters announced a proposal to increase both employee and employer contributions to initially 8% and then later to 10%.

KiwiSaver would be compulsory, and KiwiSavers and employers would receive tax cuts to cover the increases, Peters said.