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CTU wants 2% KiwiSaver contribution rate

The Council of Trade Unions (CTU) is proposing some changes to the KiwiSaver Bill currently before Parliament.

Thursday, April 27th 2006, 5:53AM

by Rob Hosking

One change is to add a new contribution rate of 2% of gross income, as well as the 4% and 8% figures currently included in the bill.

“We’re concerned that even with the fee subsidy, the first home ownership part and the $1000 start up a lot of people are going to look at this and feel its too hard,” says CTU economist Peter Conway.

The CTU is also keen to have greater encouragement for employers to contribute to KiwiSaver, perhaps through some sort of tax concession.

There is no provision for that in the KiwiSaver Bill and Business New Zealand – the country’s main employer body – has expressed opposition to any move to push employers into contributions.

Experience both in New Zealand – most recently with the State Sector Retirement Savings Scheme – and overseas has shown that one of the biggest attractions for people to join a workplace savings scheme is if there is an employer top up, because employees are effectively getting a pay rise. It is also a feature of the Australian compulsory workplace savings scheme.

Conway says the voluntary aspect of KiwiSaver means employer goodwill is essential.

“Employers can kill this thing. The fact is, when people join a new firm they want to fit in and if the employer gives the impression KiwiSaver is not approved of it can make quite a difference.

“We can’t replicate Australia. But we may be able to replicate some aspects of it, perhaps through upcoming review of the company tax regime.

One possibility is by treating employer contributions as an expense, and allowing firms to offset them against tax, he says.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

« Law to reduce salary sacrifice announcedUnions to get into KiwiSaver »

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