Government confirmation that changes will be made to the KiwiSaver scheme in the May 19 Budget have prompted fears more uncertainty will undermine savings efforts.
The Government is believed to be considering cuts to the $20 a week Government subsidy which costs the taxpayer $662 million a year.
Prime Minister John Key and Finance Minister Bill English both confirmed changes would be made as the Government attempts to deal with the budget deficit.
“We are dealing with a series of events which have led to a very large deficit,” English said.
“There will be some changes announced in the Budget along with a lot of other steps.”
Labour finance spokesman David Cunliffe criticised the Government, saying they had previously billed the Budget as providing a boost to savings and investments.
“Unfortunately for all Kiwis, the rhetoric doesn’t really match reality.”
“For National to have any credibility on savings, English will have to announce other savings measures in Budget 2011, such as indexing savings for tax inflation or a lower rate of tax for savings incomes,” he said.
CTU economist Bill Rosenberg also criticised the possible subsidy cut, saying the $20 a week member tax credit had played a key part in encouraging people to put their savings into KiwiSaver.