KiwiSaver Beyond 65: Why Continuing Employer Contributions Could Be Crucial for Retirement
Nearly 200,000 New Zealanders are still working past 65, yet a significant number are missing out on a vital boost to their retirement savings. Currently, employers aren’t obligated to continue KiwiSaver contributions for staff once they reach 65, even though many continue to work for financial necessity or personal fulfillment. This practice could be costing older workers thousands of dollars, and a growing chorus of voices is calling for change.
The Growing Trend of Working Longer
The traditional retirement age is becoming increasingly blurred. Stats NZ data reveals a substantial and growing cohort of older New Zealanders remaining in the workforce. Almost 90,000 are over 70, representing 10.3% of machinery operators and drivers, 8% of labourers, 7% of professionals, and 9.1% of managers. This isn’t simply about choice; for many, it’s a financial imperative. As Westpac’s BT Funds Management CEO, Nigel Jackson, points out, people “sometimes could not afford to retire,” making continued savings crucial.
But the current system doesn’t reflect this reality. While 54% of KiwiSaver customers aged 65 and over continue to contribute themselves, only one-third receive employer contributions. This disparity highlights a potential inequity and a missed opportunity to bolster retirement security for a vulnerable group.
The Financial Impact: Thousands Lost Without Employer Contributions
The difference between receiving and not receiving employer contributions can be substantial. The Retirement Commission estimates that someone with a $70,000 KiwiSaver balance earning $70,000 a year could add $28,000 to their savings over five years with employer matching. Without that match, the increase drops to around $19,000. KiwiSaver, designed to supplement New Zealand Superannuation, becomes significantly less effective when a key component is removed.
“Equitable treatment from an employer is essential for those continuing to work past 65,” says Dr Michelle Reyers, policy lead at the Retirement Commission. “The current system creates a two-tiered approach, potentially disadvantaging those who need to work longer to secure their financial future.”
The Fairness Argument: Same Work, Same Benefits
Beyond the financial implications, there’s a strong argument for fairness. If an employee over 65 is performing the same role and contributing the same effort as a younger colleague, shouldn’t they receive the same benefits? Westpac argues this point strongly, advocating for a system where age doesn’t dictate access to employer contributions. This isn’t about entitlement; it’s about recognizing the value of experienced workers and ensuring a level playing field.
The Potential for Compulsory Contributions
Westpac is actively calling on the Government to consider making employer contributions compulsory for all KiwiSaver members, regardless of age. Currently, employer matching is standard for most age groups, but ceases at 65. Dr. Reyers notes that when employer matching *is* compulsory, participation rates soar to over 80%. Extending this requirement could significantly increase retirement savings for older workers.
Maximize your KiwiSaver contributions: Even if your employer doesn’t contribute after 65, continuing your own contributions can still make a significant difference. Consider increasing your contribution rate if your budget allows.
Future Trends and Implications
Several factors suggest the debate around KiwiSaver contributions for older workers will intensify. Firstly, the aging population and increasing life expectancy mean more New Zealanders will likely work beyond 65. Secondly, the rising cost of living and housing affordability challenges may necessitate longer working lives for many. Finally, the growing awareness of retirement income gaps will put pressure on policymakers to address systemic inequities.
We can anticipate several potential developments:
- Legislative Changes: The Government may review the current legislation and consider making employer contributions compulsory for all KiwiSaver members.
- Employer-Led Initiatives: More employers, like Westpac, may voluntarily extend contributions as a means of attracting and retaining experienced workers.
- Increased Advocacy: Consumer advocacy groups and industry bodies will likely continue to push for changes to the system.
- Personalized Retirement Planning: Financial advisors will increasingly emphasize the importance of tailored retirement planning that accounts for extended working lives.
The future of retirement is evolving. The traditional model of a fixed retirement age is becoming obsolete. A flexible and equitable system that supports workers of all ages is essential for ensuring financial security in later life.
The Role of Technology in Extended Working Lives
Technology will also play a crucial role. Remote work opportunities, online learning platforms, and automation technologies will enable older workers to remain engaged and productive for longer. This will further blur the lines between work and retirement, creating new opportunities and challenges.
Frequently Asked Questions
Q: What is the current law regarding KiwiSaver contributions after 65?
A: Employers are generally not required to continue KiwiSaver contributions for employees once they reach 65, even if the employee continues to work.
Q: Could making contributions compulsory impact businesses?
A: Some businesses may express concerns about the additional cost. However, proponents argue that the benefits of retaining experienced workers and boosting retirement savings outweigh the costs.
Q: What can I do if my employer stops contributions when I turn 65?
A: You can continue to make voluntary contributions to your KiwiSaver account. You can also discuss the possibility of your employer continuing contributions on a voluntary basis.
Q: Where can I find more information about KiwiSaver?
A: Visit the official KiwiSaver website: https://www.kiwisaver.govt.nz/
What are your predictions for the future of KiwiSaver and retirement planning in New Zealand? Share your thoughts in the comments below!
