Budget 2005: Employers show willingness to play part in KiwiSaver

Employers have welcomed the introduction of a voluntary workplace savings scheme in the Budget.

But small businesses have unexpectedly been caught up in the net.

Finance Minister Michael Cullen said the KiwiSaver scheme would be introduced on April 1, 2007. "Kiwis often bemoan the consequences of low saving, such as high levels of foreign ownership. But if we are to own, literally, more of our future we must lift our level of savings," he said.

The most unexpected element of KiwiSaver was the decision not to exclude small businesses, with fewer than five employees, from the requirement to offer the scheme. At least one employer suggested small businesses might wind up existing schemes because they would be relatively more expensive.

Alasdair Thompson, chief executive of the northern arm of the Employers and Manufacturers Association, believed small employers would see their inclusion as "just another burden" and be annoyed by it.

But, in general, employers were supportive of a workplace savings scheme. "Most employers appear willing to carry compliance costs to achieve the thing but would have liked some kind of recompense in their taxes," he said.

Large employers agreed. "Anything that encourages savings in our economy is good for everyone," said Foodstuffs managing director Tony Carter. Compliance costs would be minor as the scheme could be administrated through the tax system.

The chief executive of HJ Heinz in Australia and New Zealand, Peter Lucas, said the scheme might help break the spend-then-pay cycle many people were trapped in. "We are pleased the KiwiSaver is a voluntary scheme ... as employers we would be happy to play our role."

Rozanna Wozniak, chief economic adviser to Spicers Wealth Management, thought KiwiSaver less of a savings plan and more a first home buyers' scheme.

ING general manager Steven Giannoulis said encouraging people to save was "brilliant".

"Taking it out of their wages and making it easy is a good idea."

How it stacks up

* All new employees must automatically be enrolled in a workplace savings scheme, although they can opt out. Existing employees may choose to join a KiwiSaver scheme at any time.

* Employers can apply for an exemption to the automatic enrolment if they already have a work-based scheme which meets defined conditions.

* The IRD will receive contributions and channel them to individual funds, and collate and distribute information about schemes to employers for distribution to employees. Costs to employers will be minimal.

* Employers will not have to contribute to the savings of their employees. If they do, contributions can be made through the IRD.

* Employers will not have to choose a scheme provider; that will be up to the employee.

* Employers will not need to give financial advice; they will be provided with an information pack to distribute.