The changes could be effective from July next year.
One of the changes includes offering contribution rates of 6 per cent and 10 per cent of a person’s salary, added to the already existing contributions rates of 3, 4, or 8 per cent.
Retirement Commission Diane Maxwell, who heads the Commission for Financial Capability, says more contribution rates gives members more flexibility and control.
“We’ve had many New Zealanders tell us that the gap between 4 and 8 per cent is too large for those able to contribute more, so they feel stuck on the lower rates. Others want the ability to save even more for their retirement,” says Maxwell in a press release.
Inland Revenue figures showed that 24 per cent of members contribute at the 4 per cent rate, but only 9 per cent of members contribute at the 8 per cent rate, indicating more might take up a 6 per cent option if it were offered.
The currently-named ‘contributions holiday’, where you can take a break from putting money into your KiwiSaver savings, will be renamed to a ‘savings suspension’.
The commission says the name change would remove the positive connection with a holiday and better reflect the concept.
At June last year, 131,710 members were on a contributions holiday. Almost 85 per cent intended to suspend saving for the whole default period of five years.
“Stopping contributions for five years has a significant impact and disrupts long-term savings,” says Maxwell.
This period will also be reduced from five years to one year.
The proposed changes will also allow those aged over 65 to opt in to KiwiSaver, and the five-year ‘lock-in period’, which affects those who join KiwiSaver between 60 and 65 years of age, will be removed.
The bill, Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill, was introduced to Parliament last week.
You can follow the bill’s progress here. It's scheduled to have its first reading this afternoon, and then will be sent to the Select Committee for public submissions.
First published 3 July, 2018
Story by Claire Connell
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