Temporary migrants lose $3 billion in lost KiwiSaver contributions
Staff Reporter
Auckland, October 17, 2022
Thousands of temporary migrants may be unwillingly falling years behind in their retirement savings an AUT Report has found.
Those living in New Zealand on temporary work, student or visitor visas are not currently allowed to join KiwiSaver until they transition to resident-class visas.
This could be resulting in billions of dollars lost from the pockets of future New Zealand-based retirees, as these people are unable to access personal, government or employer contributions to KiwiSaver for years of their working lives.
The Report, completed by AUT and funded by the Commission, investigated the impact of the policy and how it could be disadvantageous to those living in the country on temporary visas.
The research followed 70,305 migrants over 10 years and found that about 10,000 of these migrants were still in New Zealand on temporary visas after five years.
The estimated loss in savings from this time (including interest gained over time) was $36,000-$51,000 by the time they reach 65 years old.
Significant impact
Retirement Commission Director (Policy), Dr Suzy Morrissey said this amount could significantly impact one’s retirement, and while people could be using other forms of retirement saving methods, they are unlikely to be getting the same benefits.
“KiwiSaver is designed to require little effort and remove the usual barriers to long-term investing and hence there is no support for these people. Contributions to KiwiSaver are also supplemented by the government and employers, which allows us to save much more than the average savings account. If temporary migrants could access KiwiSaver, they would have a much fairer start on their journey to retirement. For those who left New Zealand, they would not be allowed to take the government contributions, only their personal and employer contributions and any interest earned on those would leave the country,” she said.
Dr Morrissey said that the cumulative impact of this policy is likely to be sizable, considering the study followed only one annual cohort of migrants.
A new group every year
“Every year, a new group is likely to be missing out on a decent chunk of their retirement savings. Over ten years, this could add up to over three billion dollars being missed out on by migrants. That is a significant disadvantage for them in their later years of life.”
Rebecca moved to Auckland from London in 2019 after falling in love with the country while visiting family. After three years living and working in New Zealand, she now plans to retire here, but is still on a standard savings account and feels frustrated to think of the savings she is missed out on.
“Often people do not think about saving for retirement unless they are directly contributing to a fund like KiwiSaver. I have missed three years of contributions and the potential compounding growth of those funds. It could be a little longer whilst I wait for my residency visa! I know a lot of people who have been ineligible for KiwiSaver for much longer than that. I want to start building my life and planning for the future. KiwiSaver would be a great opportunity to assist me in saving for my first home and looking after my money and investments properly,” she said.
This research was conducted as a part of the 2022 Review of Retirement Income Policies in response to one of the terms of reference set by the Government. This collation of data will feed into the final report of recommendations from the Retirement Commissioner in response to the work that has been undertaken for the review.
