KiwiSaver changes make saving tougher
The KiwiSaver changes announced in the Budget do not alter the need for people to save for their retirement, but they will make the journey to your savings goal much tougher.
Thursday, May 19th 2011, 5:22PM
That's according to Workplace Savings NZ, the voice of workplace savings.
The Government today confirmed it will halve the member tax credit to a maximum of $521 a year from 1 July this year. In addition, the minimum employer and employee contribution will rise from 2% to 3% from 1 April 2013. And the tax free status of employer contributions to KiwiSaver will end from April next year.
Workplace Savings NZ Chairman David Ireland says while disappointed at the reduction in the level of the Government's contribution to private retirement savings, given the economic climate he accepts the need for the Government to look carefully at its spending priorities.
"The rationale behind getting into KiwiSaver and making savings through the scheme hasn't changed.
"But the decisions announced today do make it much harder for individuals to reach their savings targets.
"And the Government is effectively leaving the private sector to its own devices to reach that goal.
"Current contribution rates are low by international standards. Increasing them to the pre-National Government level of 4 plus 4 and beyond had an air of inevitability about it.
"However, we hope the approach to implementing private contribution increases will be business friendly. Merely signaling increases in advance won't necessarily make it easier for KiwiSaver members or their employers when the time comes" says Ireland.
A concern of Workplace Savings NZ is that savers unable to adjust their affairs to cater for the increased minimum contribution rates will opt for a contribution holiday, and it may be hard to get them back on the savings track.
There are currently over 1.65 million New Zealanders using KiwiSaver as a preferred retirement savings vehicle, with more than $8 billion locked away.
"These people, and others planning to join KiwiSaver, need to have confidence in the sustainability and stability of the scheme if that savings success story is to continue.
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