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KiwiSaver start should be deferred: Spooner

The financial services industry will not be able to deal with the stress of KiwiSaver and investment tax changes, MPs were told yesterday.

Thursday, May 11th 2006, 4:56AM

by Rob Hosking

KiwiSaver’s start date should be put back at least six months and perhaps a year, Mercer’s Jill Spooner told Parliament’s finance and expenditure select committee.

Both KiwiSaver and the tax changes are due to take effect from April 1 next year.

Spooner told MPs that the industry would face “huge strain” meeting that deadline.

“It increases the risks of mistakes happening, and that is at a time we are wanting to build confidence in financial services, so people will join KiwiSaver,” she said.

For KiwiSaver to work funds will have to become Qualifying Collective Investment Vehicles (QCIV) under the proposed tax changes. “We don’t yet know how look through will work, and we don’t’ know how the QCIV regime will apply.”

“The bill hasn’t been tabled.”

If the start date was put back people could still start contributing on 1 April 2007, and the Inland Revenue Department, which will be collecting contributions as part of the PAYE system, could hold all contributions until the providers were ready.

“This would afford all parties additional time to establish robust systems and provide the education programmes necessary for the smooth operation of KiwiSaver.”

Many submissions advocated including a 2% gross income contribution option.

At present the bill provides for 4% and 8%.

Both the Council of Trade Unions and the Engineering Printing and Manufacturing Union advocated 2%, saying 4% is too high for many people.

Northern Employer’s chief executive Alasdair Thompson said his members would probably not have any objection to that.

Spooner advocated including 2% and dropping the 8% altogether.

“The 8% is gross income so for take-home pay it amounts to 13% for a lot of people. I don’t think there’s going to be a lot of demand for an option which leads to that sort of drop in take home pay.”

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

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BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
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HSBC Premier LVR > 80% - - - -
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