Budget 2015: End of kiwisaver kickstart inevitable: expert

Finance Minister Bill English yesterday announced the $1000 kickstart for Kiwisaver would be dropped immediately. Photo / File

The decision to cut the $1000 kickstart for KiwiSaver was inevitable and is unlikely to stop people from joining up to the retirement savings scheme, says an expert.

Finance Minister Bill English yesterday announced the subsidy would be dropped immediately, saving the Government $500 million over the next four years.

Savers previously got the $1000 when they signed up to KiwiSaver as a one-off incentive.

It was particularly popular with parents who sign their children up as children are not eligible for the other incentives.

Claire Matthews, a KiwiSaver expert at Massey University, said dropping the $1000 kickstart was not unexpected given the scheme's popularity.

"I think it was going to happen eventually and with the numbers now enrolled in KiwiSaver that incentive is not required any more."

About 2.5 million people have joined KiwiSaver since it was launched in 2007.

Matthews said it was unfortunate people who had delayed signing up would miss out but she doubted future generations would miss it.

"Future generations will be joining at a young age so the $1000 is not as important."

Matthews said the cut made sense as it would be a significant saving for the Government but it was disappointing that it had chosen to tinker with KiwiSaver again.

"The Government has got to stop tweaking it and say we have got it right."

Financial commentator Mary Holm said the change had come as a surprise but if it had been signalled it probably would have resulted in a rush of people signing up beforehand.

Holm said despite the change the scheme was still a good deal.

"Roughly on average for the ordinary employee they get their money doubled by getting the employer's 3 per cent and the tax credit."

But she said the change meant there were now not a lot of reasons to sign up children to the scheme.

"It's suddenly not as attractive."

Holm said that despite the instant cut-off she did not believe it was unfair to people who had yet to sign up.

"People have had almost eight years to get in."

Bruce Kerr, director of Workplace Savings, said the change would make it more financially viable to introduce automatic enrolment for all people aged 18 and over.

"The Government until now has been a little wary of moving to auto-enrolment. The removal of the $1000 certainly would make it fiscally more attractive."

English said the other incentive, the $521 annual tax credit, would remain in place.