Two recent announcements in relation to KiwiSaver will be of note for all employers. First, the Government has named the six ‘default providers’ it intends to appoint for KiwiSaver. The ‘default providers’ will be the operators of the KiwiSaver retirement savings schemes to which employees will be allocated by the IRD if neither the employee nor the employer makes a selection of some other provider.
The default providers are:
- ASB Group Investments Limited.
- AMP Services (NZ) Limited.
- ING (NZ) Limited.
- Mercer Human Resource Consulting Limited.
- National Mutual Corporate Superannuation Services Limited (trading as AXA New Zealand).
- TOWER Employee Benefits Limited.
The government is also going to extend the tax break it created for KiwiSaver schemes to registered superannuation schemes. The government announced some time ago that employer contributions to KiwiSaver schemes would be exempt from specified superannuation contribution withholding tax (SSCWT). Employers do not have to make contributions to KiwiSaver, but the tax break makes contributions employers choose to make to KiwiSaver schemes deliver more value to employees at less cost to the employer than employers’ contributions to non-KiwiSaver superannuation schemes.
There were immediate complaints from operators of existing corporate superannuation schemes. They argued that existing schemes would not be able to compete with KiwiSaver.
The government has now agreed to extend the tax break to registered superannuation schemes provided that they lock in members’ contributions until retirement. Details are not available at the time of writing because these were to be drafted into the Tax Bill in a supplementary order paper.
This is good news for the superannuation industry generally. It will enable employers to provide worthwhile superannuation benefits to staff at less cost than has formally been the case.
KiwiSaver comes into operation in July 2007. All employers should now be considering their position. We are happy to assist with information and advice.
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