Susan Edmunds, Money Correspondent
Most of the perks of KiwiSaver have been eroded over the years, and one fund manager is worried that it could be costing
members tens of thousands of dollars.
When the scheme started, there was a $1000 kickstart available, a government contribution of $1 for every $1 contributed
up to $1042 a year, and there were tax exemptions for employer contributions.
Now, 17 years later, all that remains is the member tax credit, which has been halved to $521.43 for those who
contribute $1042 in a year.
KiwiSaver provider Mercer said that government contribution had remained at $521.43 since 2011.
Because it had not even been adjusted for inflation, it was now worth 26 percent less than when it was initially set.
At its current rate, an 18-year-old who joined in 2011 and received government contributions until retirement would have
$60,147.46 from that contribution alone, Mercer said.
But they would be missing out on $26,790.23 due to inflation.
That calculation is based on Mercer's balanced fund.
If the government contributions were indexed to match inflation, they'd have $86,937.69, or 45 percent more in savings
at retirement.
Mercer consumer wealth leader Sarah Whitelock said the contribution was valuable, but the extra $27,000 that could come
with inflation adjustment would help people to retire with dignity.
"Quite a few things have been taken away from KiwiSaver. We need to strengthen it by improving contributions and a key
way to do that would be to inflation-proof the government contribution."
She said it would particularly help women and other vulnerable groups who tended to reach retirement with less money
invested.
Rupert Carlyon, founder of KiwiSaver provider Koura said the incentives for KiwiSaver had been diluted over the years.
"When it was brought in by Michael Cullen that was meant to be the starting point and it was meant to continue from
there...if anything, we've watered it down from that starting position."
"When we contrast that with what's happened in Australia and other markets around the world, they're going the other
way. We seem to be putting our head in the sand and not doing anything about it."
He said New Zealand should aim for a scheme like Australia's.
"I would like to see some real incentives for people to contribute."
He said people liked KiwiSaver and understood it was an important thing to be part of.
"It's become part of our core financial system but the problem is there is a risk the expectation people have out of
KiwiSaver are not going to be matched because we have not evolved the settings and where we need to get to."