Savings scheme for first time buyers

The KiwiSaver Bill has been introduced into Parliament and will have its first reading on Thursday.

The scheme aims at kick-starting New Zealanders into saving more for their retirement.

Each account would start with $1000 from the Government which could not be withdrawn until retirement.

The scheme would be voluntary for all employees. Those aged 18-65 would be eligible.

"It is essential New Zealanders develop better long-term savings habits so they can look forward with more confidence to a retirement that meets their aspirations," Dr Cullen said.

"KiwiSaver will give hundreds of thousands of working New Zealanders a helping hand to secure their financial futures."

Those in the scheme can choose to put aside 4 or 8 per cent of their gross salary. Savers would have personalised accounts they take with them when they shift jobs.

The scheme would be flexible so people could stop contributing for periods when circumstances changed.

On top of the $1000 deposit, the Government would also contribute towards members' fees, Dr Cullen said.

New employees would be automatically enrolled and have six weeks to decide whether to remain. Existing employees, the self-employed and others groups such as beneficiaries would also be able to join.

"This is the best way ahead," Dr Cullen said.

"Workplace schemes have the advantage of reaching a broad section of the population and international research shows more will participate if enrolment in retirement schemes is automatic."

Dr Cullen said the scheme removed barriers to saving.

"We have low savings rates compared to other countries. That means we depend too much on the savings of foreigners. If we are to have a bigger stake in our future, it is vital that we develop a long-term savings culture."

A withdrawal of funds is allowed for a deposit on a first home.

"When eligible people have been KiwiSaver members for at least three years and are ready to buy their first home, the Government will help with their deposit."

Savers would get $1000 for each year in the scheme up to a maximum of $5000.

The scheme, announced in last year's budget, is set to start on April 1, 2007.

- NZPA