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English announces KiwiSaver soft-compulsion plans

The Government is to proceed with KiwiSaver auto-enrolment in 2014/15 - subject to returning to surplus - said Finance Minister Bill English.

Tuesday, October 18th 2011, 3:00PM 2 Comments

He said the Government needed to be mindful of the cost of all programmes so KiwiSaver auto-enrolment would commence "in the same fiscal year in which we return to surplus and start to repay debt."

"As we signaled in the Budget, we believe there is merit in a one-off KiwiSaver auto-enrolment exercise, where people in the workforce not already in the scheme would be signed up with the ability to opt out."

Government estimates that auto-enrolment would attract between 200,000 and 275,000 new members to KiwiSaver at a cost of up to $550 million over four years.

English said the Government had rejected auto-enrolment before 2014/15 as the immediate focus was on returning to budget surplus.

"While we're running deficits in the next two years, that's money the government would have to borrow. Borrowing money to put into KiwiSaver accounts is not real savings - we are applying the same approach to resuming contributions to the Super Fund," he said.

"Depending on uptake and design, officials estimate a KiwiSaver auto-enrolment could cost the Government up to $550 million over four years - including the one-off $1,000 kick start payments to new members and ongoing annual member tax credits. We intend to fund this from within existing budget allowances."

English said the Government agreed with the Savings Working Group that a compulsory savings regime is not warranted.

"Many New Zealanders have already opted out of KiwiSaver because they have valid reasons for not saving for retirement right now - including paying off their mortgage or being members of private savings schemes."

Details of the auto-enrolment framework are to be finalised next year after the Government considers submissions on a public discussion paper to be issued in early 2012.

« Advisers offered flexible currency productKiwiSaver mismatch a 'huge challenge' for advisers »

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Comments from our readers

On 21 October 2011 at 5:53 pm Michael Donovan said:
Kiwisaver is not needing to be made compulsory..!

You just instil a savings habit into "young" people while real young at primary school...just like we did every Wednesday into our "squirrel" Post Office savings account.

Then ...later in life the savings habit is nothing much different than the "habit" formed where we still wash our hands after the toilet....automatically.

It used to work real good....and savers were the main.
Why on earth did they change it and stop something that worked well???
Michael Donovan
On 26 October 2011 at 8:49 am David van Schaardenburg said:
A couple of meaningful enhancements to the proposed autoenrolment process would be;

1. Get rid of the default funds ahead of this - they are anti competitive and are not designed for long term savers.
2. Stagger the Kickstart payment over 4 years with the payments being reliant on ongoing contributions by the KiwiSaver member.
Commenting is closed

 

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