New Zealand's Retirement Commissioner is calling for big changes to KiwiSaver to ensure the scheme does not leave anyone behind.
The commission has released its latest three-yearly report into the country's retirement income systems.
It makes 12 recommendations to the Government, eight of which it says could be introduced quickly and at little cost.
More support for low-income earners
The report recommends targeting government contributions more squarely at lower-income earners.
They are the group most affected by the Government's recent decision to halve its annual contribution to KiwiSaver accounts.
Previously, people received 50c for every $1 they contributed up to $1042 a year, but that has been cut to 25c.
Commissioner Jane Wrightson said it meant that instead of government contributions forming up to 20% of a lower-income person's KiwiSaver balance at retirement, they might now only form up to 11%.
She said the government contribution could be increased for low-income people to give support where it was most needed. That could be funded by phasing out the contribution for higher earners.
People earning up to $49,000 could receive 50c per $1 up to $1000 maximum contribution a year, people earning up to $58,000 could get 50c per $1 on a maximum of $500 contributed and people earning up to $67,000 could get 25c per $1 up to a $500 contribution.
"Although this approach would mean fewer people would receive the government KiwiSaver contribution, they would continue to receive support for their retirement through NZ Super, and through matched and increasing employer contributions to KiwiSaver.
"These actions are designed to improve adequacy, close savings gaps, and ensure the retirement income system remains fair, sustainable and trusted."
More contributions for people on paid parental leave
Wrightson also called for the government to increase the amount it gives to people on paid parental leave to $1000, and pay it regardless of whether the person themselves put money into KiwiSaver.
Since last year, the government has contributed 3% to KiwiSaver for paid parental leave recipients who make their own contribution of at least 3%.
Wrightson said of the 57,635 people who received paid parental leave in the most recent year, 12,390 contributed to KiwiSaver.
"This [$1000 payment] costs around $34 million, would be simple to administer, would help ensure high take-up, and directly addresses gaps in retirement saving. Implementation would require careful coordination with Inland Revenue and KiwiSaver providers."
Contributions past 65
She said employer contributions should also be mandated for people over 65. At present, employers can stop contributing when their staff reach this age.
She said it should also be possible for people on temporary visas to join KiwiSaver and receive employer and government contributions.
"If we want people to stay here, migrants to stay here, it would be good to give them another incentive, wouldn't it?"
Sidecar saving
The report resurrects an idea for a "sidecar" savings account to run alongside KiwiSaver to provide help in financial emergencies.
She said this could be an alternative to the big increase in hardship withdrawals seen recently.
People would save a set amount into a sidecar account, and money contributed beyond that would go into their KiwiSaver account as normal.
But any withdrawals would be limited to the sidecar.
"This approach has been trialled in the United Kingdom to reduce reliance on high-cost credit for unexpected expenses and hardship withdrawals from retirement savings. Financial shocks can derail retirement saving, and sidecars could help mitigate this risk by giving people access to funds without undermining their long-term goals."
She said when someone had a sidecar fund alongside KiwiSaver, if they hit financial difficulty they could access a limited amount of money without digging into their main KiwiSaver savings.
"If we are watching a rise in hardship applications, which we are, there's two issues.
"Number one, what kind of applications are these? And there isn't enough data publicly available to know, so we want to encourage some work to be done around that, so we understand what the rise is about.
"If it's sheer poverty, that's one thing. If it's for, I don't know, overseas health treatments and the rest of it, that starts to get a slightly different and interesting texture. So we need to understand more about it.
"And secondly, particularly for those who are in poverty, giving a kind of mechanism to go in and out of a tiny amount of your KiwiSaver, the sidecar, is a much better way than having repeated applications for full withdrawal."
Ban total remuneration packages
Wrightson also wants to ban total remuneration packages.
Someone who is paid via total remuneration receives a set salary package, from which both their own contribution and their employer contribution are paid - rather than a salary with the employer contribution on top.
The review said the legislation clearly stated that compulsory contributions needed to be paid on top of gross salary and wages, except where parties agreed otherwise.
"The legislation also includes a provision, described as being for the avoidance of doubt, which explains that a duty of good faith applies when parties to an employment relationship bargain for terms and conditions relating to compulsory contributions and associated matters."
The report said research showed about half of employers used a total remuneration approach for at least some employees and 25% used it for all employees.
"The removal of the incentive that is the employer contribution on top of salary or wages goes against the spirit of the scheme."
Wrightson said many of the recommendations were about making KiwiSaver easier and fairer for everyone.
"Anybody in a secure, well-paid job has an employer contribution. Those who are self-employed don't. Those who are low-income, those contributions are small. They're the ones we're suggesting we need to target."
The report also called for improved reporting of balances, contributions and withdrawals to allow smarter policy setting, and a nationally consistent decumulation framework to help people manage their money in retirement.
Political agreement
But Wrightson said there ultimately needed to be long-term political accord across all the major parties to provide certainty for future retirees and encourage sound decision-making.
"The trouble with the approach to KiwiSaver in recent times is that it has been quite piecemeal. We just tinker. What we're trying to suggest is that if we stopped tinkering and looked at all the issues collectively and combined them with issues around New Zealand Super, we will get much more robust and agreed mechanisms which will help New Zealanders better because it will be more secure. What we don't want is a system that changes through each election."
The report calls for a Parliamentary working group to set the strategic direction for a "10-year retirement income road map", and group led by the Retirement Commission to implement it and ensure it addresses KiwiSaver, NZ Super and innovation.
"So when you start going into the NZ Super discussions, if you want to make a systemic change, like, I don't know, means testing, put the age up, whichever one you want to go for... Firstly, you want to get a broader agreement around that, and secondly, you want to understand how to mitigate the harms from that. And thirdly, what will that do to things like government contributions to KiwiSaver, employer contributions to KiwiSaver? These things are interlinked and need to be considered together, and the current system doesn't easily allow that to happen."
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