By Bernard Hickey
Labour has tweaked its policy of making KiwiSaver compulsory to make it more equal with employers and to allow those on very low incomes to be exempt from the scheme.
Labour estimated the changes would bring in around half a million more New Zealanders into the scheme and a 30 year on an average income of NZ$50,000 who was already in the scheme would be NZ$150,000 or 40% better off at retirement because of higher employer contributions and larger returns on investments.
Around 2 million New Zealanders currently have over NZ$21 billion in KiwiSaver, although over 250,000 are not actively contributing.
"Universal KiwiSaver is a no-brainer," Labour Leader David Cunliffe said.
"It will not only make the lives of all retired Kiwis better, it will increase our savings pool so our companies can access capital to grow their businesses. This means New Zealand will borrow less from offshore and keep our profits in Kiwi hands," he said.
Labour announced its KiwiSaver policy for Election 2014 in Parliament house, giving the following details:
1. All full time, casual and part-time employees would be automatically enrolled in the scheme from October 2015, apart from those who are exempt. The opt-out provision currently in place would be removed.
2. Exemptions will be made for those on very low incomes, the self-employed, beneficiaries and students. Those who can prove hardship can suspend their contributions. Labour said the low income threshold would be set after consultation with employers and unions, although Labour noted the Australian level was very low.
3. Combined contributions would increase from 6% currently to 9% by 2021, with the split being 4.5% from the employee and 4.5% from the employer. Labour's policy before the 2011 election was that employers would contribute 7% and employees 2%.
3. Existing KiwiSaver members would see their contributions and their employer's contributions rise at a rate of 0.25% per annum from October 2015 to 4.5% each by April 2021.
4. New members would see their contributions start at 1% in 2015 and then rise to 2% in April 2017, then 3% in April 2018, 4% in April 2019 and then 0.25% each in the following two years to a maximum of 4.5%. However, the employer contribution would start at 3% in 2015 and rise 0.25% per annum thereafter.
5. Labour stuck with is policy announced in April that it would use variable KiwiSaver employee contributions to help the Reserve Bank control inflation and interest rates, although it did not release any estimates of the scale of the trade-offs involved.
6. Labour would retain the current NZ$1,000 kick-start for new members and the Government member tax credits contribution of up to NZ$521 per year. However, new members would have their 'kick-start' spread over the first five years to spread the fiscal impact, which Labour estimated at NZ$141 million in the first year, while the longer term cost to the Government would be around NZ$50 million a year.
7. Labour would also keep the first home buyers KiwiSaver deposit subsidy of up to NZ$5,000 per person, but said it would look at increasing the assistance, "fiscal conditions permitting."
Here was Labour's 2011 KiwiSaver policy in Interest's policy summary.
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