KEY POINTS:
Low-income earners are only half as likely as high earners to join KiwiSaver, according to Treasury projections.
Budget documents posted on the Treasury website show the department's middle estimate is for KiwiSaver to be taken up within 10 years by 70 per cent of those earning more than $38,000 a year ($731 a week) and 50 per cent of those on between $26,000 and $38,000 - but by just 35 per cent of those below $26,000 ($500 a week).
A low estimate forecasts take-up by 60 per cent at high incomes but just 30 per cent at low incomes.
A high estimate puts the most optimistic take-up rates at 90 per cent at high incomes but still only 50 per cent at low incomes.
The official projections are borne out in two surveys published since the KiwiSaver scheme started on July 1.
Both polls, by Research NZ and by Kudos for KiwiSaver provider ING, show higher numbers in upper income brackets planning to join the scheme.
Auckland University economist Susan St John said the projections confirmed her view that the scheme's Government subsidies would exacerbate inequalities that build up during working life.
"People who are not in KiwiSaver will pay higher overall taxes to pay for the subsidies for those who are in it," she said.
The Budget calculated that the KiwiSaver subsidies of up to $20 a week for savers and their employers would cost taxpayers $1.2 billion a year by 2011.
It estimated that household savings would rise by then by slightly less, $1.1 billion. In effect, Government saving will be reduced by $1.2 billion a year to induce a $1.1 billion increase in private saving.
The net effect on saving is expected to be minimal, partly because the Treasury expects that about 60 per cent of those joining KiwiSaver will already be contributing to existing superannuation schemes.
A further 20 per cent are expected to have to borrow to fund at least part of their KiwiSaver contributions, leaving only the remaining 20 per cent who will join a super scheme for the first time through KiwiSaver and will not have to borrow to do so.
The Treasury says the likely pattern is indicated by the current spread of people in existing super schemes, which rises with increasing income from only 9 per cent of those earning under $15,000 a year to 47 per cent of those over $60,000.
"Second, we know from Inland Revenue's employer monthly schedules that around 40 per cent of individuals with incomes of less than $26,000 work for less than six months of the year," it says.
"It is unlikely that many of these casual and seasonal workers would want to contribute to a superannuation scheme.
"We also know that New Zealand Superannuation will provide a similar level of consumption in retirement for individuals of less than $26,000, suggesting that many of those with incomes in this range may have little need to save for retirement."
The current gross pension for a married couple on New Zealand super is $511.40 a week ($26,593 a year).
