Most Read Contributor in New Zealand, September 2016
The Prime Minister today provided a little more detail
on the KiwiSaver changes which will be announced in next week's
Importantly for scheme providers, these will not be made
until after the election – giving the public an
opportunity to vote on them and industry time to
This Brief Counsel speculates upon the likely content of
the new round of KiwiSaver amendments.
The Prime Minister had a strong savings message in his
He explicitly endorsed KiwiSaver as a valuable savings
He emphasised that the proposed changes to KiwiSaver are
designed to ensure its long-term sustainability and survival.
What will stay
The $1000 kick start for new KiwiSaver members.
The tax-exempt status of employer contributions
The first home purchase subsidy (probably).
What will be added
Increased contributions from businesses and individuals
"when we can afford it economically". We read this as a
signal that default employee and maximum employer contribution
rates will revert (again over time, in the case of employer
contributions) from 2% to perhaps 4% each, as was originally
intended. The Government expects these changes to produce a modest
overall increase to KiwiSaver savings rates. Total KiwiSaver funds
are projected to rise from around $8 billion currently to $25
billion by 2015 and $60 billion by 2021.
What will be pared back
The member tax credit contribution of up to $20 a week for
Member tax credit contributions are likely to be either reduced
across the board, or targeted to low and middle income earners (it
is unclear which). We deduce this from Mr Key's comment that
the Government will change the mix of contributions to KiwiSaver,
with less coming from the member tax credit and more from
individuals and employers.
Chapman Tripp comments
The Government is fudging when it signals that the member tax
credits have no real utility because they "make no difference
to national savings". The argument ignores the fact that
people can access these incentives only if they save.
Given the options of either targeting the $20 a week incentive
or reducing it but maintaining its universality, we expect a
targeted approach would be safer politically as, for higher salary
and wage earners, the employer contribution is a powerful driver to
join and contribute to KiwiSaver.
From a provider perspective, this is yet another round of
amendments to a scheme which has been subject to almost continuous
tinkering during its relatively short life. However, the deferral
of the latest changes until 2012 might just make it possible for
schemes to be re-documented in one hit next year, when providers
adopt a range of other pending governance, reporting and disclosure
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