12 May 2011

National confident about KiwiSaver cuts

11:34 pm on 12 May 2011

National is confident New Zealanders will understand that cuts to KiwiSaver are necessary and it will test that in November's election.

The voluntary savings scheme was introduced on 1 July 2007 by the previous Labour-led Government.

At present, workers enrolled in the scheme must pay at least 2% of their wages, which employers are required to match.

Prime Minister announced on Wednesday that the Budget will include changes to KiwiSaver. The tax credit of up to $1040 a year, or about $20 a week, will be reduced. The $1000 kick-start for new members will remain.

Labour and the Greens say the changes will hit the low-paid the hardest, as they do not have the extra funds to boost their savings.

Mr Key says he will be delivering a clear message at the election on 26 November that the cuts are needed to get the Government's books back in order.

Finance Minister Bill English says he believes New Zealanders will accept the argument that cuts have to be made to KiwiSaver in order to improve the wider economy.

Mr English says he thinks National's plan will stack up well, KiwiSaver cuts included, when compared with its opponents.

Other views

ANZ Bank, the biggest provider of KiwiSaver, says the changes are not enough to derail the popularity of the scheme.

However, Jonathan Eriksen, an independent actuary, calls the decision risky and dangerous.

Mr Eriksen says National has already halved the incentives for 1.7 million people who have signed up for KiwiSaver and this could prompt people to consider abandoning the scheme.

The Council of Trade Unions says that if people fear the Government is going to make constant changes to it they will be more reluctant to put money away.

Business New Zealand says the current scheme is unsustainable.