KiwiSaver – security and choice
28 February 2006
KiwiSaver – security and choice
KiwiSaver will give New Zealanders more choices for securing their financial futures, Finance Minister Michael Cullen said today.
The KiwiSaver bill has been introduced into Parliament and will have its first reading on Thursday.
"It is essential New Zealanders develop better long-term
savings habits so they
can look forward with more confidence to a retirement that meets their aspirations.
"KiwiSaver will give hundreds of thousands of working New Zealanders a helping hand to secure their financial futures.
KiwiSaver will be a voluntary scheme for all employees, both full and part-time, aged 18 - 65 years. They can elect to put 4 or 8 per cent of their gross salary automatically into a savings fund. Savers will have personalised accounts they can take with them as they shift jobs.
People will be able to choose their KiwiSaver scheme which is designed to be flexible so people can have contribution holidays as their circumstances change.
“The government will kick-start each person’s account with a contribution of $1000 to be locked in until they retire,” Dr Cullen said. “It will also make a contribution towards members’ fees, increasing the return that people get on their investment.”
To make participation easy, new employees will be automatically enrolled in KiwiSaver and have six weeks to decide whether to remain members. Existing employees, the self-employed and other people, such as beneficiaries, will also be able to opt in.
"This is the best way ahead," said Dr Cullen. "Workplace schemes have the advantage of reaching a broad section of the population and international research shows more will participate if enrolment in retirement schemes is automatic."
"We are removing obstacles to make it as easy as possible for workers to embrace KiwiSaver and so take the first steps to building a long-term savings habit.
"We have low saving rates compared to other developed countries. That means we depend too much on the savings of foreigners. If we are to have a bigger stake in our future it is vital that we develop a long-term savings culture," said Dr Cullen.
"The Labour-led government has made this a priority. KiwiSaver is part of a package of measures designed to promote New Zealanders' long-term financial security.
Other initiatives include:
- the new State Sector Retirement Savings Scheme; a voluntary savings scheme aimed specifically at state sector employees;
- the New Zealand Super Fund that will pre-fund the future cost to the government of New Zealand Superannuation.
Dr Cullen said owning a home was also a critical part of long-term financial security.
"That's why KiwiSaver will help some savers by allowing them to make a one-time withdrawal of their funds for a deposit on their first home.
“When eligible people have been KiwiSaver members for at least three years and are ready to buy their first home, the government will help with their deposit. They will receive $1000 for each year's membership in KiwiSaver, up to a maximum of $5000," Dr Cullen said.
KiwiSaver is a world-leading scheme that has been praised by leading pension experts overseas and the Economist magazine. Britain's independent Pensions Commission has also hailed automatic enrolment as a feature that country should adopt.
"The scheme continues the progress of the Labour-led government in helping New Zealanders build a better future. KiwiSaver, other assistance to first time home buyers and the Working for Families package underline this government's commitment to helping those who need it most," Dr Cullen concluded.
KiwiSaver is anticipated to begin operating on April 1, 2007.