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Changes For Kiwisaver Take Shape

Contributor:
Fuseworks Media
Fuseworks Media

The Government is understood to be considering axing the annual $40 fee subsidy it puts into KiwiSaver accounts to help pay for a better deal for low income workers.

Under changes it announced before the election contributions to KiwiSaver will be lowered to 2 percent of the weekly wage, matched by the Government.

Under Labour, savers could contribute either 4 or 8 percent with a government subsidy of up to $20 a week and compulsory employer contributions, rising to 4 percent by mid 2011.

However, the changes meant those earning under $52,000 would get far less than those on bigger incomes.

"There's some inequity about that and we are considering that issue," Prime Minister John Key said yesterday.

He told reporters that if the Government increased its dollar-for-dollar contributions to KiwiSaver accounts for low income workers to achieve equity it would cost an extra $700 million a year over five years.

It is understood that cost could be met in two ways. Firstly, the reductions National made to its tax package before the election saved about $580 million over five years.

That saving could be put back in through KiwiSaver because it is considered to have been a windfall which was relatively small in comparison with the overall tax cut package.

It is also considering abolishing the $40 annual payment to KiwiSaver accounts, which would be worth about $30 million a year.

Details of what the Government is going to do will be known when it brings legislation to Parliament later this week.

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