Is it fair that if you keep working when you're over 65 your employer doesn't have to contribute to your KiwiSaver account? Martin Hawes thinks not and wants a law change

Financial adviser and Summer KiwiSaver investment committee chair, Martin Hawes, is calling for the Government to go a step further in tweaking legislation to allow over 65-year-olds to join KiwiSaver.

He wants the employers of over-65s in KiwiSaver to be made to contribute to their employees’ accounts.

Currently over-65s can be in KiwiSaver, but they need to have become a member before they turned 65. It’s also their employer’s choice whether or not they contribute towards their accounts.

While the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill, introduced to Parliament on June 28, proposes enabling over-65s to join KiwiSaver, it doesn’t go so far as to changing employers’ contribution obligations.

Yet Hawes maintains it’s unfair towards those who work after 65 that on their 65th birthday, their employer can suddenly stop contributing to their KiwiSaver while they continue to do so.

“I hesitate to call it ageism,” he says.

Hawes notes that turning 65 and receiving NZ Superannuation has nothing to do with employers.

He hasn’t done any formal research on it, but has observed a lot of employers stopping contributions to their employees’ KiwiSaver accounts once they turn 65.

Hawes fears this discourages people from remaining in KiwiSaver, with them instead withdrawing all their funds at 65 and parking them up in term deposits.

“That’s not a good outcome,” he says.

Further, he notes that people who have savings of $100,000 or $200,000 at retirement won’t be given the time of day by a financial adviser.  

Keeping their money in a KiwiSaver fund can therefore be a good inexpensive solution, he believes.

Requiring employers of over-65s to contribute to their employees' KiwiSaver accounts was not a recommendation the Commission for Financial Capability made in its 2016 Review of Retirement Income Policy.

Asked why not, Retirement Commissioner Diane Maxwell says other recommendations took priority.

She was conscious she already had a long list of recommendations, and wanted to ensure her main ones were picked up. 

However she commends Hawes for making a "sound proposal" and encourages employers to pay contributions to their staff aged over 65 of their own accord.

Submissions on the tax bill are due on August 23.

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31 Comments

Anything that keeps elderly people working is good for NZ, good for the economy and good for the individual involved. Being thrown on the dustheap because you are getting old is depressing. So exempting employers contribution to Kiwisaver will encourage employment of older workers. Instead of optional which is certainly wrong because it is arbitrary make it compulsory - say drop the employers contribution every five years starting at age 50 until it is zero at age 70.

We will be the only ones who can remember how to actually roll up our sleeves and do a job, way things are going. Just watching Nation on tv3 about the gaming industry. That is the future, oh what joy.

I agree with you there pocketaces, there are a lot of people for whatever reason not engaging in a job. I read something during the week that went, if you want to keep a young person out of hot water, fill it with dishes. I think it means to get kids doing jobs around the house so they have a work ethic. Unfortunately the home appliances have made life easier so parents just seem to do the jobs and not the kids

I’m assuming that the trigger for this at 65 is the commencement of pension payments. Guess the thinking was that this was sufficient to supplant employer contributions? Not sure if the two should be linked as such but if the employer should decide to continue contributions surely they should be able to do so.

"100,000 or $200,000 at retirement won’t be given the time of day by a financial adviser"

What does this imply? too poor to bother with? A lot of NZers are pulling kiwisaver out to buy a house, what's the chance they will have time to build it up enough again once they are committed to a massive mortgage...

Part of the problem is that there are only 8,848 financial advisers (AFAs) and yet, just for KiwiSaver, there were 2,864,204 members as at May 2018.  That is 324 per adviser, plus all those people who need advice for mortgages, for insurance, for all other types of financial issues. There are just far, far too few advisers to get personal service for everyone.

It's a sellers market and they can afford to be selective. If you were an adviser, you would obviously gravitate to a well-healed client base.

This is a consequence of costly registration and qualification rules. As sensible as that is, it means most people won't have access to basic - even necessary - personal financial advice unless the number of qualified advisers rises hugely and we can find a sensible, non-conflicted way to compensate them for their skill and effort.

Well that is an angle that had never considered. And the disparity must get worse depending on access/availability. at any one location plus obviously some will be more competent than others meaning they should naturally be in greater demand. Suppose A lot of investors just end up at their bank and hope for the best.

I agree, Foxglove. This is a very interesting angle. Seeing the concrete numbers is quite shocking. Perhaps this is worth its own story. What are retirees to do? Most will not have the smarts required when dealing with the shark-infested waters of the financial world. Why would they? Yet while $200,000 may not be worth it for a financial advisor, it is still someone’s life savings. You say term deposits, but my experience getting local banks to follow simple instructions on maturity, has involved alot of hassle. One solution might be a gov-backed annuity scheme.

WWE, don’t tell me your bank too consistently, sneakily loads your term deposits to renew themselves at maturity even though you have instructed them to pay P & I at maturity to your current account. And even when you go in and get that corrected, if you don’t watch out by some unidentifiable computerised miracle, lo and behold some way through the term, it reverts to the renewal. Very, very p..sing offy!

Probably 8,000 too many. Do it yourself because the AFA doesn't give you a refund if their advice is rubbish. Had too many friends invest as per advisors advice and end up regretting it. Basic rule is do not try to be clever (~ unless you are talking multi-millions and then the AFAs may be viable) - keep it simple and don't fret if some other investment pays 0.25% more..If you don't totally understand an investment then just don't do it.

David, in the file you reference there are actually only 1886 AFA's who can provide personalised financial advice. This is only a fraction of the 8848 advisers that are registered on the FMA's website. Column D in the excel sheet shows the authorised financial advisers.

Well the reality is they are financially stuffed regardless with 200k. Most AFA look at portfolios that are 500k plus on client selection.

I know a lot of people in their 50s struggle to stay fully employed regardless of their skill set or motivation.
The agenda to increase retirement age certain does not consider the reality of the work place. Nice to see stress and burn out in office work finally getting a mention.

If not getting employer contributions after 65 is ageism, surely the fact I don’t get paid NZ super before 65 is ageism too! Giving people a benefit just because they are 65 even though they are perfectly capable of working seems pretty ageist to me!

Well you are right. Most office workers should be working until they are 70 and that is when superannuation ought to start. However manual work is different - after a life working as a building labourer or drain-layer you should be retired at 50 on full super.

So better to make contributing to a super scheme compulsory, and mandate a higher minimum rate for hard labouring trade, then let them choose when they want to retire, and cancel national superannuation totally (from some reasonable time in the future)

No reason the state (ie taxpayers) should be paying super for some people from 50 and others from 70.

Lapun
As a former personnel manager of a staff of just on 100 of both manual and non-manual workers I strongly disagree. Mental burnout among "office" workers was as much of an issue as was those with physical burnout for those involved in physical work.
An older "office" worker does develop a different set of skills; in many instances this is things like institutional knowledge, greater experience with dealing with issues that arise, and often more considered decision making. However, they loose ability such as processing time, and logic thinking skills .
One thing is common however; many suffer mental burnout and with this a loss of efficiency and motivation similar to that of manual workers' physical abilities.
Having said that, there are many exceptions to both manual and non-manual workers and their ability to keep working well beyond 65.
When discussing this issue, care needs to be taken to avoid both stereotypical judgments and ageism.

Thanks for putting me my place. The idea of workers on building sites being past it at 50 I stole from our current retirement commissioner. Your comment about losing mental abilities after 50 strikes a chord - it does vary considerably but it applied to me (IT computer programmer now retired - but even coding at 50% of former ability I was still better than many young graduates will ever be).
We have inherited a system that demands 100% performance until the day you retire and then it is 0% performance. As a personnel manager you will have the depth of experience to suggest solutions - there ought to be a way of reducing work load and equivalent pay as you pass 50.

It should be natural career progression. Hands on tools from twenties to say mid thirties, then moving up into supervisory roles and eventually managerial roles or moving into other careers. One problem with that is far to many tradies in NZ are self employed and addicted to "cashies".

Printer8, nice comment. Trouble is as one progresses up the ladder things are rarely fair. If not careful the more diligent and capable can easily end up “carrying” those of lesser ability or inclination or both. Senior management often has an attitude as if to say, if what lands on my desk is ok, I don’t care how it got here. That lack of recognition and the injustice of it can become mentally crippling especially if it is prolonged and the identity has no alternative other than that job. Kipling I think sums it up nicely in his verse of “the thin red line.”

Thanks for your support. I am pleasantly surprised as I was expecting negative comments as not many appreciate that mental burnout is probably just as prevalent as physical burnout.
As a manager, it should be a goal to ensure that all employees performed to their potential which includes managing potential employee stresses. Not only does prolonged stress and lack of personal fulfillment contribute to ill health and consequently absenteeism, they are both significant contributors to physical and mental burnout.
There has been a fair amount of research internationally but unfortunately this area seems sadly overlooked in this country. Employee stress management can add to increased productivity as well as a more pleasant working environment.
Unfortunately the Retirement Commissioner probably needs to consider her comments in light of this.

I couldn't find her remarks with a quick google search; I think it was from a radio interview. However she does make a lot of sense. This is the nearest to relevence:
""She’s recommended the age of eligibility (“we don’t call it age of retirement, because people aren’t retiring”) be raised to 67 by 2034. But there are challenges, she says. One is to look after those who can no longer do physically demanding work, by investing in retraining. The other is to change employers’ attitudes towards older employees.""

I liked Pragmatists idea that when you are too old to actually work you end up as a manager. That explains a lot.

Not quite what I said.

The problem with having a state paid pension at differing ages by occupation is that the system would be rorted. I for one would have no problem going and getting an electricians licence while continuing with my current employment and changing my job title to electrician I could easily apprentice to one of our contract sparkies that I already often work alongside . I doubt my employer would object as having a licenced sparky on staff would have some benefits for him, and reduce his costs of hiring contract sparkys for some of the smaller jobs. I'd continue on with my existing work mostly and do some more electrical work, and start claiming a pension 15 years early. Win for him, win for me, taxpayers out of pocket by something like $300k over 15 years. And no, i wouldn't have an ethical problem with doing that, it'd just balance out all the WFF payments and various other distortions in the tax system that have benefited others.

Different story of course if its their own money they are getting back from their own kiwisaver accounts, except for the problem of the ones that do retire at 50 and live to a ripe old age and no doubt would run out of money.. then what?

I think I can relate to that and suggest that the approach of an academic to an actual workplace situation or episode, will always differ to that of those with actual hands on experience.

"Keeping their money in a KiwiSaver fund can therefore be a good inexpensive solution, he believes."
I agree totally and wrote about this last week using KiwSaver post 65 as an investment tool compared to the costs of managed funds (e.g. entry fees and higher management fees) and greater accountability / transparency through monitoring and comparisons to other funds such as carried out by interst.co and Morningstar. (Note that my comments applied to funds with the same investment profile and same gross returns.)
Post 65 I have diversified investments and use my KiiwSaver as a means for exposure to equities/share market rather than through managed funds.
Note that it is unlikely that financial advisers will recommend this as there will not be the commission for selling KiiwSaver. Commission will come from the entry fee applicable to managed funds but not KiiwSaver funds.

Or if you had read the response Kiwisaver; with high fees, little to no transparency, higher risk then many people can accept, with financial faults for over 50,000 people being covered up by banks and reduced returns in a restrictive environment missing even basic financial flexibility offered by most investment plans that enable people to survive in their retirement. Lacking any sufficient review or research capability and only looking at banks was your biggest failing. Kiwisaver has been great for the banks, pretty much a captive market, unable to adequately move funds into more flexible arrangements for their situation and haemorrhaging Kiwisaver fees to line the bank's pockets. No financial advisor is needed to see how much it benefited the companies more than the people. No wonder so many went on contribution holidays to better manage the financial investment themselves long term. Another downturn and not only will the returns be lost but also significant amounts of the capital (with management fees attached). Even your quoted KS fee rate was high for such little returns & the risk in comparison.

Paciifca; I have read your response three times to try to understand what you are saying.

However, sadly it is nothing but rambling nonsensical rubbish.

I take it failures in reading and comprehension then is part of why you have a much poorer investment scheme. Or if you had read my prior response to yours. Summarising your glaring omission of critical faults in transparency and basic accountancy with Kiwisaver is easier said then done as you can lead a horse to water but you cannot teach it to save more water to take on route.

Saying out loud what we're not allowed to say. Most employers would rather employ someone in their 40's rather than 65-70's. The one advantage the over 65 has is that the employer doesn't have to pay their Kiwisaver contribution, now Hawes wants to remove that last little advantage the "mature" employees have. Not good.

I think there are some very narrow points of view being expressed on this subject. People vary widely in their ability to function well, on rotating shifts for example, particularly as they get older. Physically, mentally and emotionally many are ready for a change.

However people also vary in their ability to plan financially for 20-30 years ahead.
Improving financial skills through out life (eg a car is not an asset, and neither is a new phone!), increasing understanding of basic concepts like compounding interest, and a commitment by government and employers to facilitating part time, flexible working environments would help.

I would congratulate Sam Stubbs and the Team at Simplicity for their efforts to inform and educate, we need a lot more of this.

There is a vast amount of unpaid work done by the over 60's, without this the costs fall to the public purse (particularly child and elder care support). When you are 65, and supporting a 90 year old mother, and providing childcare for a 3 year old grandchild, you may not feel too impressed at being told you you should go out and get a "real job". Lets acknowledge that the years of 60-80 encompass much diversity, and aim for a robust system which ensures both protection from poverty and some lifetime personal responsibility.

"a car is not an asset, and neither is a new phone" granted but many jobs require these items as part of the employees toolbox. A client manager or tradie needs fast direct transport to disparate job sites and a on call technician needs to be on call. So many jobs require private vehicle transport and mobile communication, (especially recent models for software testing & cs), that good employers may even offer to fund or subsidise much of it. If however you state you will not be available to quickly travel to sites or receive mobile communication you can be literally out of the job. Hence they become assets due to job requirements for them. Often there is substantial resale potential in a vehicle, devices not as much but considering they can be resold or traded for higher quality versions they still count.

You need to drop back to the avocado on toast comparisons to really snub your nose at the younger generations and watch them rightly ridicule that. After all job tech requirements have changed decades ago, along with housing affordability & access. Even those above 65 working in the tech industry have been at the forefront of the personal vehicle & mobile drive. It was for many decades part of the parcel. Saying those items are useless is awfully backdated... I forget what do we call the generation prior to those that fought WWII? The Interbellum ones. Where having a horse was considered a transport option instead of for sport.

The real injustice is that an over 65 that is gainfully employed still gets a pension. Not only are millenial workers being taxed to death to give them a pension that they themselves will never get, those slow, computer illiterate over-65s are taking up jobs that could be done by young people.