KiwiSaver changes worry employers

Photo / Thinkstock

As speculation mounts over the Government's intentions for KiwiSaver, a group representing employers who offer workplace retirement plans is concerned that tinkering with the scheme may deter people from joining.

The chairman of Workplace Savings NZ, David Ireland, said yesterday that the uncertainty could prompt a resurgence in interest with people wanting to sign up for the state-sponsored pension scheme while incentives for it are still in place.

"But the uncertainty does feed the inertia. It does give people an excuse not to join and not to save because they think that they can't trust the Government to not fiddle with what is basically a private savings scheme."

Prime Minister John Key is expected to deliver a speech today that will further outline the Government's intentions for the scheme. Full details are likely to be revealed in the May 19 Budget.

KiwiSaver has 1.67 million members and in the current financial year the Government will pay about $922.5 million towards it, including the $1000 to kick-start each new account.

Ireland said member tax incentives could be reduced and the one-off incentive payment could instead be staggered over a period of time, perhaps five years.

"It is a saving at the margin, but it is something that the Government can do immediately while still sticking to their comments that they are going to continue to encourage people to save."

He said that while there were concerns about the sustainability of KiwiSaver, the flipside was that there was no other form of preferential treatment for savings, as existed in comparable countries.

Ireland, who is a partner with the financial services team at law firm Kensington Swan, said the industry was growing tired of constantly changing systems to cope with changes to the regime. And changes made today could have long-term consequences, he said.

"There is the need to build long-term private savings to help address the problem that we will have in a few years' time with the increasing age of the population."

Ireland said the Government's message was that it wanted to improve New Zealand's savings outcomes.

"We are just hoping that the current economic pressures don't result in that message being simply hollow words."