LISTEN TO MARTIN HAWES TALK WITH MIKE YARDLEY ABOVE

Government officials have declined to back a call to make it compulsory for all employers' to make KiwiSaver contributions to over 65-year-olds.

Under the current law it is up to individual employers to decide if they keep putting money into their staff members' account when they turn 65.

Many big employers do but others stop the payments when a person turns 65 - a situation which has created an uneven playing field for older workers.

Claire Matthews, a retirement savings expert at Massey University told the finance and expenditure select committee last year that the policy was unfair.

"Currently the legislation says, irrespective of the age you joined, your employer does not have to pay their contribution to your KiwiSaver account once you turn 65.

"To me, that's unfair because a 65-year-old employee effectively gets paid less than their 64-year-old colleague."

Matthews was submitting on a Taxation Bill which includes a number of changes to KiwiSaver.

But in a summary of submissions released Friday officials have recommended the submission be declined.

"The rationale for this is that requiring compulsory employer contributions for over 65-year-olds which can be immediately withdrawn would not be consistent with the purpose of this incentive, which is to encourage long-term retirement savings."

The officials also noted that the upper age of entitlement to compulsory employer contributions was aligned with the maximum age of entitlement to the member tax credit (which is also 65).

The member tax credit or the government's contribution of up to $521 a year also stops at 65 or after the member has been in the scheme for five years if they were over 60 when they joined.

Under 18 years olds also miss out on the government contribution and employers' do not have to contribute to their KiwiSaver accounts.

Matthews said they appeared to have missed the point.

"I think they have missed the fundamental unfairness if someone over 65 is not receiving employer contributions.

"I don't see the comparison with the MTC [member tax credit] as relevant – I support that not being provided to members over 65 because it is a contribution from the government, and in its place members over 65 are (in most cases) receiving a different contribution from the government towards their retirement in the form of NZ Super."

Matthews said employer contributions were more than a form of incentive to encourage KiwiSaver participation.

"They are also part of the remuneration received for the services being provided to the employer in the form of labour.

"If someone is working at age 68 and is a member of KiwiSaver, it is unlikely they will immediately be withdrawing the funds, but even if they are, it is still being used to fund their retirement, which is the fundamental purpose."

Martin Hawes, chair of the investment committee for the Summer KiwiSaver scheme, said it was not a good argument to say that it did not meet the long-term savings goals of the scheme.

"I just don't think that is a good argument. Someone working at 65 could work until they are 75 and that is significant.

Hawes said he could not understand why someone who turned 65 had to take a pay cut if their employer did not continue contributing.

"I think that is outrageous."

He said a lot of private sector employers were continuing to pay staff over 65 KiwiSaver contributions.

"Let's enshrine this in law if it is going to be common practice."

The bill includes proposals to allow people over the age of 65 to join KiwiSaver, changing the contribution holiday name to savings' suspension and adding options to contribute at 6 per cent and 10 per cent.

It is now set down for its second reading in parliament.