KEY POINTS:
KiwiSaver will be fairer under yesterday's new rules than it would have been under either National's earlier proposed changes or under Labour's version of KiwiSaver.
Compared with National's pre-election proposals, yesterday's changes give a better deal to lower-paid employees but a somewhat worse deal for everyone else in KiwiSaver, including children. Still, the scheme will remain well worth joining for everyone under 65.
One of yesterday's two big changes is that employees who earn less than $52,150 will be able to increase their tax credits by topping up their contributions to $1040 a year.
This brings them in line with higher-paid employees, whose contributions would have entitled them to the maximum $1040 tax credit anyway, and with non-employees, who can contribute anything up to $1040 and have it matched by the tax credit.
The other big change yesterday is that the $40-a-year fee subsidy will end next April. This will, of course, hurt all members, but will probably be most noticeable in children's accounts.
Over all, National's changes to KiwiSaver - compared with Labour's version of the scheme - are a mixed blessing for employees.
The changes open up the scheme to people who can't afford to contribute 4 per cent of their pay, or are reluctant to tie up that much money, but are willing to put in 2 per cent.
Note, though, that to get the first home subsidy of $3000 to $5000, you have to contribute 4 per cent of pay for three to five years - unless the Government changes that. "The Government is aware of the issue and that it needs to be considered in light of the new KiwiSaver framework," said an official in Bill English's office.
On the other hand, compulsory employer contributions will stay at 2 per cent of pay from next April, whereas under Labour they would have risen to 3 per cent in April 2010 and 4 per cent from April 2011 on.
Also, the new Government's changes make life tough for employers in the next couple of years, before the axing of employer tax credits is at least partly offset by the reductions in their contributions. And, to the extent that employers are worse off, they may be less generous to employees - in terms of voluntary extra KiwiSaver contributions and money available for pay rises.
Broadly speaking, the changes have moved KiwiSaver from being extremely generous to employees and generous to non-employees to being still pretty good for all.
