Government promises kickstart cut the last

The $1000 KiwiSaver "kickstart" payment, which has been in place since the scheme began in 2007, is gone for good

The Government has promised not to make any further cuts to KiwiSaver after scrapping a $1000 payment which all members received upon signing up.

Prime Minister John Key said the Government's remaining contribution to the savings scheme, an annual tax credit worth $521, was "rock solid" and there were no plans to scrap it.

The $1000 "kickstart" payment, which has been in place since the scheme began in 2007, was gone for good, Finance Minister Bill English said after delivering the Budget. The removal of the payment was effective from 2pm yesterday and legislation would be passed under urgency to enforce it. The change would not affect existing KiwiSaver members.

Mr Key said the scheme was so popular that it no longer needed a sign-up perk. The subsidy was used to attract members when KiwiSaver was an "unknown concept", but it now had 2.5 million members.

"The advice that we've had from IRD and others is that people are signing up because their employers are well and truly accustomed to the scheme, they're used to it," Mr Key said.

KiwiSaver had created "considerable costs" for taxpayers, Mr English said. Government had spent $2.6 billion on the kickstart payment alone, and scrapping it would save $125 million a year. These savings would be channelled into "priority public services".

The Government predicted sign-up rates would not be affected.

But the change riled Opposition MPs, who said it was mean-spirited and would affect young people more than others.

Labour's Grant Robertson said it would reduce savings at a time when New Zealanders should be saving more. "We need long-term thinking, not short-term," he said.

Green Party co-leader Metiria Turei said axing the payment was a "nasty move" which saved money by taking it from young New Zealanders.

"Young Kiwis may not have expected to come out ahead after today's Budget," she said, "but few of them would have expected to be robbed of the KiwSaver kickstart other generations got."

The KiwiSaver scheme, which was introduced by the previous Labour Government, has gradually been pared back over several budgets by the National-led Government. The biggest changes came in 2011, when National removed the tax exemption for employer contributions, halved the member tax credit and raised the minimum contribution rates from 2 per cent to 3 per cent.