Default scheme move a "missed opportunity"
Financial Services Council chief executive Peter Neilson said the decision to stick with default schemes investing conservatively would mean New Zealanders had to save more, for longer, and pay more tax.
It had been suggested that default schemes should alter savers’ risk tolerance depending on their age but that was ruled out when the results of the Government's review of the system were revealed yesterday.
Neilson said it was a missed opportunity and the OECD had provided information on how guarantees could be provided if the Government was wary of risk.
“Many people who have enrolled into KiwiSaver have defaulted into conservative funds without making an active choice to be there…If someone on the average wage contributing 6% pa stays in a conservative fund for the next 40 years they’ll end up with a nest egg at least $150,000 smaller than if they invested in a balanced portfolio, $250,000 less than being in a growth fund. Investors also need to know that conservative funds suffer the highest effective tax rate which increases the savings required to get to a comfortable retirement.”
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