By Amanda Morrall
KiwiSaver providers say there were few surprises in National's announcement on Wednesday signaling cuts to member tax credits as part of an overall effort to sheer NZ$5 billion a year off expenditure on the scheme as well as Working for Families and student loans, but want an end to further tinkering to KiwiSaver.
Continued changes to the nascent national saving programme will not only undermine investor's confidence, but will have a destabilising effect on the savings industry, warned boutique provider Carmel Fisher.
"On top of the changes that were made a few years ago, it's not a good way to run a savings industry,'' said Fisher, in response to Government's pre-Budget notice on KiwiSaver changes.
Prime Minister John Key announced that member tax credits, currently NZ$1,043 a year, will be cut, but wouldn't specify the amount to be cut until the May 19 Budget. Meanwhile, the changes would not take place until after the November 26 election, so as not to breach a National 2008 election promise to retain the incentive in its present form.
Key further indicated that employer and employee contributions would be increased, having the dual effect of saving Government money but also increasing national savings, if only "marginally.''
The NZ$1,000 kick-starts will not be sacrificed.
Default provider Tower Investments said the move was largely in line with expectations and realistically necessary to reduce Government's foreign borrowing as a means of financing the programme.
Tower Investments' chief executive Sam Stubbs said the minor adjustments showed fiscal responsibility while sending a message that KiwiSaver was here to stay.
"It's a relatively strong signal that they want the pool of members (now more than 1.7 million) to continue growing and their savings to continue to grow over time," Stubbs said.
Since the savings scheme was introduced in 2007, funds under management have grown to more than NZ$8 billion.
Government projects that the KiwiSaver kitty will swell to NZ$25 billion by 2015 and NZ$60 billion in 10 years.
"That ultimately has to be a good thing long-term for New Zealand," said Stubbs.
'Not bad to pay more'
While KiwiSavers themselves will have to sacrifice more from their pay to self-fund their retirement, Fisher suggested that was not a bad thing.
"It's important for us to take greater control of, and responsibility for, our personal savings, we know the country can't afford to continue subsiding that forever," she said.
Fisher did not believe that reduced member tax credits would in itself be a disincentive to join the scheme.
"Even if you got NZ$500 a year, instead of NZ$1,043, it's still NZ$500 you wouldn't otherwise have got. It's still meaningful for people on certain income levels," she said.
That sentiment was upheld by default provider ANZ Wealth, which said member tax credits were the most "sensible area for Government to review its liabilities".
John Body, managing director of ANZ Wealth, said the National government's signaled changes were in line with the provider's recommendations on KiwiSaver in its submission to the Savings Working Group.
"We have always favoured raising minimum contributions in small, incremental steps to bring us into line with other OECD country saving schemes," he said.
Body said certainty and sustainability were key priorities for KiwiSaver.
"Any changes that are designed to make the scheme more sustainable for the long term are welcome. What is most important is that we hear, certainty from policy makers, that KiwiSaver is here to stay, so New Zealanders can have confidence in their decision to join and save for their retirement," Body said.
"People just have to be given an opportunity to plan for the future and the reality is that the vast majority of New Zealanders are going to have to start saving more than they are now to save for their future," Stubbs said.
Prime Minister Key did not specify when the member contribution mix would change, but noted it wouldn't happen immediately.
“Increased contributions from people and businesses will happen at a time when the economy will have well and truly recovered, and both wages and employment will be increasing,” he said.
Body said certainty and sustainability were key priorities for KiwiSaver now and going forward.
"Any changes that are designed to make the scheme more sustainable for the long term are welcome. What is most important is that we hear certainty from policy makers that KiwiSaver is here to stay, so New Zealanders can have confidence in their decision to join and save for their retirement."