Latest news with #KirkHope
NZ Herald
5 days ago
- Health
- NZ Herald
Health insurance: Insurers seek tax break to lower costs for employer-provided health cover
However, Financial Services Council chief executive Kirk Hope wants the Government to consider whether the economic benefits of making it cheaper for employers to provide their employees with insurance would outweigh the direct costs. For example, someone with private health insurance might be able to access healthcare more frequently, enabling them to nip health problems in the bud. They could also be treated for an ailment sooner, enabling them to be more productive and get back to work more quickly. Wider insurance coverage could also take strain off the public healthcare system. Hope makes his case as the Government outsources more work to private healthcare providers. The call also comes as the Inland Revenue Department (IRD) reviews FBT settings to try to make them simpler and fairer. However, Revenue Minister Simon Watts does not appear particularly hot on the idea. Asked whether he had a view on the pitch, or whether he would consider it, Watts said: 'The proposal isn't part of the Government's work programme at this point.' Indeed, the IRD did not mention exempting insurance in an issues paper on FBT it released in April. Rather, it explained it doesn't currently qualify as a 'health and safety' exemption, as flu vaccine vouchers do, because health insurance doesn't relate to a specific health and safety risk in the workplace. Consultant accountant Geof Nightingale said this wasn't the first time he had heard calls for insurance to be exempt from the FBT. He said the idea was generally discarded because of its cost to the Crown. Nightingale believed it would be easier to make the case from a health policy perspective than from a tax perspective. Deloitte partner Robyn Walker noted the threshold for tax exemptions were generally high to avoid 'slippery slope' situations – an exemption for one thing driving calls for further exemptions. Walker also questioned whether the exemption would end up benefiting white collar workers the most, whose employers might be more prepared to pay for insurance. Hope had a different view. He argued that if large employers of low-paid workers didn't have to pay tax on top of insurance premiums, they would be more inclined to offer employees cover. According to the results of a new Financial Services Council survey, 78% of people with life insurance and 56% with health insurance pay for it entirely out of their own pockets. Affordability is the key issue, with health and life insurance premiums rising at a rate well above the inflation rate. Jenée Tibshraeny is the Herald's Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
RNZ News
5 days ago
- Health
- RNZ News
Health insurance crunch prompts calls for fringe benefit tax break
Most countries in the OECD offer incentives to encourage people to take out insurance, Financial Services Council chief executive Kirk Hope says. Photo: Pixabay Health insurance is becoming too expensive for some New Zealanders and it's prompted a call from the industry for tax breaks to help. Research from the Financial Services Council, which represents life and health insurers, shows that a third of people with health insurance have downgraded or reduced their cover in the past year. A third of New Zealanders have health insurance and another 27 percent said they previously had it but no longer do. Southern Cross - the country's biggest health insurer - has an online tool which shows that a 40-year-old female non-smoker with a 45-year-old male non-smoker partner and a 10-year-old child would pay $120 a fortnight for the KiwiCare plan, which splits the cost of treatment between the patient and Southern Cross. Wellbeing One, which offers standard surgical and healthcare cover, is $136. For older people, it becomes much more expensive. A couple who are aged 60 and 65 could pay $324 a fortnight for Wellbeing One if they were non-smokers. At 70 and 75, that could increase to $518 a fortnight. This does not account for pre-existing conditions. Health insurance premiums can increase annually in line with insurers' claims expenses, inflation and the cost of doing business. But they also rise as someone gets older. Southern Cross chief sales and marketing officer Regan Savage told Checkpoint last week that some of its customers had cancelled their cover. He said all insurers were increasing their premiums. "Up to March this year our premium increase was around 16.5 percent, that changes to about 20 percent when you include ageing. One of the things about health insurance is your risk increases with every year you age," he said. Southern Cross said in its most recent full-year results announcement, the cost of claims was rising faster than premiums. It is a friendly society, which means it is not set up to make a profit. Financial Services Council chief executive Kirk Hope. Photo: Financial Services Council chief executive Kirk Hope said health insurance would provide faster access to care, lower out-of-pocket costs and should support overall wellbeing. He said the majority of people with insurance felt they received value from it. "It certainly plays out when you have something happen to you which is not covered… people go 'yeah I wish I had done that at the time'." But he said cost was a key barrier. He said older people often chose to increase the excess on their insurance, which could lower their premiums, or target cover to the areas they were most concerned about. But he said the country needed to do more to help. He said most countries in the OECD offered incentives to encourage people to take out insurance. "In Australia, if you don't take out health insurance by a certain age, you're charged more tax." Hope said it would make sense to expand cover through workplace schemes. At the moment, 56 percent of people with health insurance pay for it themselves and 78 percent of those with life insurance. But he said employer contributions to life and health insurance should be exempt from fringe benefit tax (FBT). FBT is paid on benefits given to staff and Hope said this could act as a disincentive. "FBT on employer provided group insurance schemes discourages businesses, particularly small and medium-sized enterprises, from including insurance as an employee benefit," he said. "There are important policy implications here. "Improving access to life and health insurance can enhance workforce resilience, reduce pressure on the public health system, and provide critical financial buffers for families and individuals in times of crisis. This tax effectively penalises employers for supporting the wellbeing of their staff." He said many other countries allowed premiums paid to be deducted from a person's taxable income, which would help people who were retiring or coming out of the workforce and no longer in group schemes. "New Zealand is an outlier in the OECD because we literally provide no deductibility for insurance with the exception of income protection. That's an area where there should be a degree of focus." Founder of Enrich Retirement Liz Koh. Photo: Supplied Founder of Enrich Retirement Liz Koh said whether health insurance made sense would depend on someone's personal circumstances. They might think about the likelihood of suffering a health problem in the future, the financial consequences if that happened and their ability to pay for care. "How much of that risk am I willing to take on myself and how much risk do I wish to pass on to someone else by paying an insurance premium? "Some people choose to self insure as they have significant financial assets. Others simply can't afford the premiums. In that case they need to reduce risk by living a healthy life - eating the right foods, exercising... "The risk for young people is that they think they are bulletproof when they are not. Health issues can come out of the blue. It pays to have at least some cover before you develop health issues, because once you have pre-existing conditions this may affect your premium and/or your ability to get insurance cover." She said some people expected to rely on the public health system. "The thing is that once you get into the public health system it's fantastic. The problem is in getting into it. Long waiting lists, staff shortages..." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Scoop
06-06-2025
- Business
- Scoop
KiwiSaver Providers Hope Public Support For Contribution Increases Will See Default Rates Move Higher
KiwiSaver providers are hoping public support for increased contribution rates could provide the incentive to push them still higher. The latest RNZ-Reid Research poll included questions about the changes to the KiwiSaver scheme announced in the Budget. From 1 April next year, the default contribution rate for employers and employees will rise to 3.5 percent. The following April, it will be 4 percent. But the government will halve the credit it offers to people who contribute at least $1042 a year to their KiwiSaver, to a maximum $260.72. It will not be available to people earning more than $180,000. The poll showed a total of 61.2 percent of respondents supported the contribution change, 21.4 percent opposed it and 17.4 percent were not sure. Among National voters, almost 80 percent supported the change. But only 23.7 percent of total voters supported the government's move to halve the contribution rate, and fewer than half of National supporters. Fisher Funds chief investment officer Ashley Gardyne said he was not surprised by the findings. He said we should not stop at 4 percent plus 4 percent, and should push towards higher contribution rates. "I think it's really positive we've seen the contribution rates increase, and ultimately if we want people to get to the right amount of savings in retirement those rates do need to move up through time." He said the Australian model, where contribution rates slowly lifted over a number of years, could be one to follow. "They took a really long-term, 10-year approach of increasing contributions by a little bit every year. The reality is it's tough to find extra money in your pay cheque to put into KiwiSaver but it is really important long-term as well to make sure you end up in the right position for retirement. "Having a long-term vision like that is really important." Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, agreed the results were expected. "We've known for some time that in terms of contributions those will be relatively well received. Obviously it's a bit tougher if the government contribution is being halved or in some cases removed that's not going to be particularly popular, the key thing is the government continues to contribute something." He said there should be a bipartisan agreement about a long-term strategy for retirement income. He said it was also worth discussing other steps the government could take, such as adjusting the tax settings. "Other changes the government might be able to make to the tax system in the future to continue to incentivise particularly savings and even up the playing field between savings and investment and housing. That's some fundamental shifts in the tax system." More incentives needed Ana-Marie Lockyer, chief executive at Pie Funds, said it was good to see that most people supported the contribution increase. "In terms of the halving of the government contributions we need to acknowledge the government faced some hard choices as a result of the tight fiscal environment. But I believe we should be offering more incentives for Kiwis to save for their retirement, not fewer. "Reducing the government contribution is more likely to impact the retirement balances of lower income earners - a group who deserve the same opportunities as everyone else." She said even a reduced contribution of $261 a year could grow to more than $40,000 over a person's working life. "I think what's more important than the dollar amount of the government contribution is the number of Kiwis who don't receive it, either because they're not eligible or they're not contributing enough. "While it's a good thing that the government contributions are now available for 16- and 17-year-olds, I think the government missed a trick by not extending it to the increasing number of over-65s who are still working, whether by choice or necessity. "What's probably more concerning is the thousands of KiwiSavers missing out on the MTC government contribution each year because they're not contributing enough to qualify, leaving millions of dollars on the table. "So the poll is actually a timely reminder for people to ensure they've contributed at least $1043 by 30 June in order to receive the full government contribution of $521 - before it reduces to $261 next year." A spokesperson for Finance Minister Nicola Willis said the changes to KiwiSaver were designed to help Kiwis to save more and make the scheme more fiscally sustainable. "For example, an 18-year-old earning the minimum wage of just under $49,000 a year who invests in a balanced fund can expect to have almost $910,000 in KiwiSaver at age 65. Under the old settings it would have been about $732,000. "The results are similar for most other people. The Retirement Commissioner estimates the changes will increase retirement savings for about 80 percent of KiwiSaver members."
RNZ News
05-06-2025
- Business
- RNZ News
KiwiSaver providers hope public support for contribution increases will see default rates move higher
Financial Services Council chief executive Kirk Hope. Photo: RNZ/ Dan Cook KiwiSaver providers are hoping public support for increased contribution rates could provide the incentive to push them still higher. The latest RNZ-Reid Research poll included questions about the changes to the KiwiSaver scheme announced in the Budget. From 1 April next year, the default contribution rate for employers and employees will rise to 3.5 percent. The following April, it will be 4 percent. But the government will halve the credit it offers to people who contribute at least $1042 a year to their KiwiSaver, to a maximum $260.72. It will not be available to people earning more than $180,000. The poll showed a total of 61.2 percent of respondents supported the contribution change, 21.4 percent opposed it and 17.4 percent were not sure. Among National voters, almost 80 percent supported the change. But only 23.7 percent of total voters supported the move to halve the contribution rate, and fewer than half of National supporters. Fisher Funds chief investment officer Ashley Gardyne said he was not surprised by the findings. He said we should not stop at 4 percent plus 4 percent, and should push towards higher contribution rates. "I think it's really positive we've seen the contribution rates increase, and ultimately if we want people to get to the right amount of savings in retirement those rates do need to move up through time." He said the Australian model, where contribution rates slowly lifted over a number of years, could be one to follow. "They took a really long-term, 10-year approach of increasing contributions by a little bit every year. The reality is it's tough to find extra money in your pay cheque to put into KiwiSaver but it is really important long-term as well to make sure you end up in the right position for retirement. "Having a long-term vision like that is really important." Read more: Australia soon to be second in world for retirement savings as superannuation pool soars Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, agreed the results were expected. "We've known for some time that in terms of contributions those will be relatively well received. Obviously it's a bit tougher if the government contribution is being halved or in some cases removed that's not going to be particularly popular, the key thing is the government continues to contribute something." He said there should be a bipartisan agreement about a long-term strategy for retirement income. He said it was also worth discussing other steps the government could take, such as adjusting the tax settings. "Other changes the government might be able to make to the tax system in the future to continue to incentivise particularly savings and even up the playing field between savings and investment and housing. That's some fundamental shifts in the tax system." Ana-Marie Lockyer, chief executive at Pie Funds, said it was good to see that most people supported the contribution increase. "In terms of the halving of the government contributions we need to acknowledge the government faced some hard choices as a result of the tight fiscal environment. But I believe we should be offering more incentives for Kiwis to save for their retirement, not fewer. "Reducing the government contribution is more likely to impact the retirement balances of lower income earners - a group who deserve the same opportunities as everyone else." She said even a reduced contribution of $261 a year could grow to more than $40,000 over a person's working life. "I think what's more important than the dollar amount of the government contribution is the number of Kiwis who don't receive it, either because they're not eligible or they're not contributing enough. "While it's a good thing that the government contributions are now available for 16- and 17-year-olds, I think the government missed a trick by not extending it to the increasing number of over-65s who are still working, whether by choice or necessity. "What's probably more concerning is the thousands of KiwiSavers missing out on the MTC government contribution each year because they're not contributing enough to qualify, leaving millions of dollars on the table. "So the poll is actually a timely reminder for people to ensure they've contributed at least $1043 by 30 June in order to receive the full government contribution of $521 - before it reduces to $261 next year." Finance Minister Nicola Willis says the changes will help Kiwis save more. Photo: RNZ / Mark Papalii A spokesperson for Finance Minister Nicola Willis said the changes to KiwiSaver were designed to help Kiwis to save more and make the scheme more fiscally sustainable. "For example, an 18-year-old earning the minimum wage of just under $49,000 a year who invests in a balanced fund can expect to have almost $910,000 in KiwiSaver at age 65. Under the old settings it would have been about $732,000. "The results are similar for most other people. The Retirement Commissioner estimates the changes will increase retirement savings for about 80 percent of KiwiSaver members." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
03-06-2025
- Business
- RNZ News
Call to rethink tax on KiwiSaver
Photo: RNZ KiwiSaver members could be significantly better off if New Zealand adopted a taxation model similar to Australia's, an economist says. Simplicity chief economist Shamubeel Eaqub ran some numbers modelling a system similar to Australia's, where contributions and returns are taxed at 15 percent. In New Zealand, full tax is paid on income contributed to KiwiSaver, and returns in PIE schemes taxed at an investor's prescribed investor rate up to 28 percent. Eaqub said an "average" KiwiSaver investor starting now could end up $60,000 better off in nominal terms at retirement on a model similar to Australia's. If tax was not paid on contributions or returns, they could be about $1 million better off - and if only taxes on returns were removed the gain would be about $300,000. "In Australia, the context is there's some conversation about whether the tax breaks are too generous for richer people. It's not that it's perfect but the point is in other countries it's heavily incentivised for people to save in their private pension." But it was not in New Zealand. Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, said the Australian model was different because that country has a means-tested pension. "The tax break that occurs in New Zealand occurs when you retire, when you get national super.. that is the equivalent of about $500,000. So I think it's hard to do a comparative analysis without acknowledging that there are significant differences between the schemes and what they are trying to achieve." But he said if the tax on savings for New Zealanders was reduced it would give future governments more "fiscal options" in relation to superannuation. He said New Zealand previously had a system that was EET - or exempt, exempt, taxed, where contributions were tax-exempt, exempt from tax within the scheme and then fully taxed when withdrawn. The Tax Working Group in 2018 acknowledged that the change from that system had potentially created incentives for New Zealanders to direct savings into investments like houses instead. Hope said it would be expensive to adjust back to EET but there could be other changes that would be more affordable. The tax working group estimated that ignoring behavioural changes, it would cost $200m to $300m a year to move to a system where returns and withdrawals were not taxed, and $2.5b a year to move to an EET system. "The higher initial cost for an EET regime arises from the fact that there will be a substantial deferral period before significant amounts are withdrawn from the scheme, and thus taxed under the third 't'. Although these are very different initial costs, the costs will be the same in the long run on a net present value basis." Hope said providing different forms of tax incentives would be beneficial for savers. He said removing or reducing the employer contribution tax would be particularly useful for low-income people. Kernel Wealth founder Dean Anderson said New Zealand was one of the few countries operating a TTE - taxed contributions, taxed returns and exempt withdrawal - model. "Our future savings would be much better off under an EET approach, where we don't pay tax on the way in but on the way out. "With low savings rates in NZ, the government should be exploring everything in its powers to grow savings rates, which benefits NZ and Kiwis over the long term. "But it's not a surprise. The recent meek KiwiSaver policy announcement did all the hard work to announce a positive gradual increase to KiwiSaver contributions, yet they fell short by announcing a three-year policy rather than outlining a decade plus long policy of incremental KiwiSaver increases." Ana-Marie Lockyer, chief executive at Pie Funds, said KiwiSaver members were at a disadvantage compared to Australians because there was no upfront tax incentive or concession as in Australia to encourage them to contribute more. "Maybe consideration of a mid-tier flat tax rate on savings up to a certain amount would encourage savings." She said employer contributions were also taxed so investors lost the benefits of compounding, and investors paid tax on bonds and deemed dividends on global equities so they were effectively paying a capital gains tax. "So contrary to the government's stated goal of helping New Zealanders' grow their KiwiSaver balances, these factors mean New Zealanders have less incentives to make voluntary contributions and pay more tax on investment earnings, resulting in smaller balances at retirement relative to our Australian friends." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
