Business, get ready; big KiwiSaver reforms are coming – The Economy of Everything

National and Labour both want employers paying more — but who ultimately picks up the bill? This week on The Economy of Everything. Brought to you by CMC Markets.

For those who have been looking across the Tasman at Australia’s $5 trillion in superannuation savings and hoping we might emulate that with a souped-up KiwiSaver scheme, the Labour Party’s policy announcement on the weekend signalled something of a victory.

This week on The Economy of Everythingpodcast, Tamsyn Parker and Liam Dann take a look at all the KiwiSaver reforms being touted this election and how transformational they might really be.

“I was briefly very happy that we might have finally got a real agreement from the major parties on compulsory savings,” Dann said.

“But have we got that? Not quite?”

“Well, sort of,” Parker said.

Both Labour and National (and New Zealand First) now have policies that would make employer contributions compulsory.

But Labour, which came out with its policy on Sunday, is not going to make employee contributions compulsory. So under Labour, you could be in KiwiSaver, not contribute yourself, but your employer would still contribute, potentially up to 6%.

KiwiSaver rules already require a contribution of 3.5% (of wages) for employers.

“It wouldn’t move up to 6% till 2032,” Parker said.

“So it’s a little way away. But obviously it’s gonna be a bit painful for businesses, particularly small businesses.”

National is also talking about upping employer contributions to 6%.

“I think if you’re in business, the message here is get ready,” Parker said.

“You’ll need to find a bit of money somehow to pay for this extra KiwiSaver contribution.”

The move from 3.5% to compulsory 6% contributions would at least be stepped up incrementally, Parker said.

“We’re talking about increases of half a per cent a year. The compulsory aspect doesn’t kick in until July 2028. So you would hope that the economy is improved by then, and perhaps people are getting more pay rises than they currently are.”

If that was the case then increases of half a per cent might not be so hard for employers to deal with.

“Or, or things might be worse. Who knows?” Parker said.

Broadly, it was good news that both major parties and New Zealand First and the Opportunity Party were now talking about some compulsion and some reforms, Dann said.

“They’re all recognising that we need to save more. They can see there are these peripheral benefits that you get from having a big pool of savings.”

This week on the podcast, Dann and Parker also preview the US Federal Reserve Rate decision, which is stirring up debate in the US and rattling markets.

And they take a look at what to expect in tomorrow’s second-quarter GDP (gross domestic product) release.

Listen to the full episode for the complete conversation.

The Economy of Everything is available on the iHeart app or wherever you get your podcasts.

The series is hosted by Liam Dann, business editor-at-large and Tamsyn Parker, business editor for the NZ Herald. Thanks to CMC Markets.