2 Feb 2011

Government considers KiwiSaver changes

7:17 am on 2 February 2011

The Government will consider recommendations from an advisory group to increase membership in the workplace savings scheme KiwiSaver.

The Savings Working Group stopped short of recommending making KiwiSaver compulsory, but said membership should be increased through automatic enrolments to all employees and those over 16, with the ability for workers to opt out.

At present workers are only enrolled as a matter of course when they start a new job.

Finance Minister Bill English says the Government will look at the proposals.

He says 1.6 million New Zealanders are in KiwiSaver, and the scheme is starting to establish a savings habit.

Mr English says about 30% of those automatically enrolled under the current rules opt out of KiwiSaver, mainly because they can't afford to pay money into the scheme.

Saving difficult for many

The head of the working group, Kerry McDonald, has conceded that the average New Zealander doesn't have an income that allows for much saving.

Mr McDonald says Government and household savings must be increased if the economy is to improve but says saving is difficult for many households, especially those on average incomes or below.

He says the average New Zealander should support fundamental changes being made to protect their jobs and their children's futures.

Savings target proposed

In its final report released on Tuesday, the Savings Working Group warned that New Zealand was borrowing too much overseas, leaving the economy vulnerable to shocks.

The task force said continued foreign borrowing is not an option, and economically, New Zealand is teetering on the edge of a crumbling cliff.

It recommended national savings be urgently increased to between 2% and 3% of GDP, or $3 billion to $5 billion a year.

Tower Investment's chief executive, Sam Stubbs, says that's a sensible short term goal but if New Zealand wants to continue to be a first world country the savings rate needs to be even higher.

Labour warns against public spending cuts

The Labour Party is warning the Government not to use the report's conclusions to push the case for radical public spending cuts.

Labour says it would support any sensible policies that would help to balance the books but says will be alert in case of any move to use the report to soften up the public for further spending cuts.