Employers opting to stop contributing to their staff’s KiwiSaver accounts when they turn 65 may be costing them thousands of dollars.
Westpac is calling for employers to continue to make contributions to employees who are over 65 and wants the Government to consider making it compulsory.
At present, employers can usually stop the contributions once someone reaches 65. Government contributions also stop when the person becomes eligible for NZ Super.
Nigel Jackson, chief executive of BT Funds Management, Westpac’s KiwiSaver provider, said continuing contributions could make a meaningful difference to a person’s retirement savings.
“Over the past three years, 54% of our KiwiSaver customers aged 65 and over have continued to make contributions to their accounts – but just one-third of this age group have received employer contributions in that time,” he said.
Westpac continues to make contributions for its workers.
“We know New Zealanders are increasingly working past 65, but employers aren’t currently required to continue to make contributions for employees in this age bracket if they’ve been a KiwiSaver member for at least five years.”
Data from Stats NZ shows there are almost 200,000 New Zealanders aged 65 or older reporting they are still in the workforce.
Almost 90,000 are aged over 70.
Over-65s made up 10.3% of machinery operators and drivers, 8% of labourers, 7% of professionals and 9.1% of managers.
Jackson said people sometimes could not afford to retire, and this was a way to support them with their savings.
“Continuing employer contributions would boost people’s KiwiSaver balances in those critical last years of working.
“We also think there is a fairness element. Workers over 65 doing the same work as younger workers should get the same benefits.”
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Retirement Commission policy lead Dr Michelle Reyers agreed. “Many people continue in paid work after age 65 and they should have equitable treatment from an employer.”
She said about 39% of wage and salary earners aged over 65 made employee contributions to KiwiSaver and almost 36% receive employer contributions who are making this contribution on a voluntary basis. So there are only a small number (3%) who make their own contribution who currently miss out on the employer match.
“However, many more people may make their own contributions if employer matching was compulsory after age 65 (in general across other age groups where employer matching is compulsory more than 80% of employees make a contribution).”
She said, as an example, if someone with an existing balance of $70,000 and earning $70,000 a year contributed for an extra five years, they could add $28,000 to their balance.
If they contributed without an employer match it would only be about $19,000.
rnz.co.nz