Keep up kids' accounts, says watchdog

People who sign their children up to KiwiSaver should contribute to it regularly, says the scheme's watchdog and Government actuary David Benison.

Benison, who is in charge of monitoring all KiwiSaver schemes, told providers at a recent Inland Revenue forum that he was concerned about the number of children being encouraged to sign up to KiwiSaver just to get the "free $1000".

As of August 31, 1.16 million people had signed up to KiwiSaver but nearly 17 per cent or 197,493 are under 18 years of age.

Benison said KiwiSaver had been designed to be a workplace savings scheme but "it has got all these children in it". He is worried about the number of people who have signed up just to get the $1000 which all new members get in their accounts when they join.

"If people have signed up their kids just to receive the $1000 and are not going to put in any more, the likelihood is that it's not going to look any good in 20 years' time."

Benison said there was a risk that the $1000 would get eaten away by fees by the time children became old enough to start contributing themselves.

When KiwiSaver began in July2007 all members received a $40 annual fee subsidy but that was scrapped in April this year under changes made by the Government.

Benison encouraged parents and grandparents to treat KiwiSaver like the old Post Office savings book and get into the habit of putting money in on a regular basis.

He said New Zealand should also consider putting a minimum age on joining KiwiSaver.

Britain was planning a retirement savings scheme in 2014 and had decided to make the minimum age 22, he said. "I think it is a discussion that could be had here."

But Benison acknowledged it would be difficult to change the scheme.