KEY POINTS:
MPs have come up with a package of changes intended to make KiwiSaver fairer for employers and better for workers on low incomes.
The proposals, devised by Parliament's finance and expenditure select committee, would:
* Allow workers to contribute 2 per cent of their income instead of the usual 4 per cent until 2010.
* Stop double-dipping by workers who are already in employer-run super schemes.
* Give low income earners a second chance to receive KiwiSaver's first home buyer subsidy.
The proposals are part of the committee's report for amendments to the KiwiSaver Act 2006 through the Taxation (annual rates, business taxation, KiwiSaver and remedial matters) Bill.
The bill had its second reading in Parliament on Thursday and is expected to become law by the end of the year.
The main aim of the amendments is to introduce the compulsory employer contribution to KiwiSaver which was announced in the Budget.
If the changes are passed, from April next year it will be compulsory for employers to contribute at least 1 per cent of their employees' gross salary to their KiwiSaver fund.
The compulsory contribution will be phased in over time, increasing by 1 per cent a year until 2011, when it will be fixed at 4 per cent. Employers will also receive a tax credit of up to $20 a week to help to pay for the compulsory contribution.
Council of Trade Unions economist Peter Conway said it was pleasing that the period for the so-called "two plus two" contribution had been extended to 2010 although the union was still hoping it would become permanent.
"We will be monitoring that 2 per cent and if it becomes popular we will be taking another look at it. We haven't given up on making it permanent yet," he said.
Mr Conway said the extension, which will allow employees to contribute only 2 per cent if they can get their employer to agree to contribute at least 2 per cent, would give the union a chance to review the evidence.
The proposal also puts measures in place to stop employers cutting their employees' income to pay for the compulsory contribution and also rules out double-dipping.
This would mean employers who already contribute to a registered super scheme will be exempt from the compulsory contribution to KiwiSaver if they meet certain conditions.
Engineering, Printing and Manufacturing Union secretary Andrew Little was concerned that it would mean existing super schemes would be closed down. "We don't want them to see that as an excuse to close down their existing schemes in preference for KiwiSaver where their contribution might be significantly less."
Mr Little said he was in talks with the Government to try to get the changes tweaked to encourage employers to keep their existing schemes open.
The proposals have also suggested that redundancy and expenses payments be exempt from KiwiSaver.
The committee has also proposed that buyers who have a determination from Housing NZ that they are in the same financial position as a first home buyer will also be eligible for the first home ownership withdrawal.
But some suggestions by the unions were turned down. The committee has opposed extending KiwiSaver to the over 65s and making the employer contribution compulsory for under 18s. A salary cap for contributions was also turned down.