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\nPhoto: Unsplash\/ Li Rezaei\n<\/p>\n
KiwiSaver providers are expecting to see some members opt to keep their contribution level static, even as the default rate rises.<\/p>\n
It was announced last year that the base contribution rate for KiwiSaver would lift from 3 percent to 4 percent by 2028.<\/p>\n
The first stage of the increase, to 3.5 percent, takes effect from April 1.<\/p>\n
But from 1 February, members can apply for a temporary rate reduction, which will keep their contributions at 3 percent this year.<\/p>\n
Employers can then also match that reduced rate.<\/p>\n
The temporary reduction can be stay in place for anywhere from three months to 12 months but people need to reapply to continue after that.<\/p>\n
Dean Anderson, founder of Kernel, said he expected an increase in inquiries when the changes took effect in April.<\/p>\n
“While the long-term benefits for retirement savings are clear – with analysis suggesting funds could last significantly longer in retirement – the immediate reality is a potential change in take-home pay for many.<\/p>\n
“This is a particularly important concern for those on ‘total remuneration’ contracts, as they will see a double hit: their own contribution increasing and their employer’s increased contribution being deducted from their gross salary.<\/p>\n
“I also strongly recommend that all employees, especially those working for smaller businesses that may not use automated payroll platforms, triple-check their payslips in April. Payroll adjustments for these new rates are mandatory, and manual errors are a real risk during this transition.”<\/p>\n
A spokesperson for Generate said because people would ned to take action on the reduction through IRD, that might be where most of the impact was felt.<\/p>\n
“We may get calls when people see their rate change and aren’t aware it was going to happen.”<\/p>\n
Simplicity chief economist Shamubeel Eaqub said when changes happened automatically, they would often stick. “That’s the thing with auto-enrolment, you have to take action to opt out.”<\/p>\n
Government modelling suggested the increase in contribution rates could make a material difference to a person’s retirement outcomes.<\/p>\n
It said someone who had an income of $60,000 at 25, had two children, a year of parental leave and withdrew money at 30 for a house would end up with 26 percent more at retirement with the higher rate.<\/p>\n
A high-income earner could end up with 28 percent more and a low income or part-time worker could end up with an additional 21 percent.<\/p>\n
Both National and NZ First have pledged to push contribution rates higher if they are in Government again.<\/p>\n