KiwiSaver fee subsidy, mortgage diversion rules enacted

Press releasePreparations for the 1 July introduction of KiwiSaver advanced today with the signing of an Order in Council that bring into effect both the annual fee subsidy to be paid to members and the rules governing the use of KiwiSaver to help repay the mortgage on the family home.

“We welcome these legislative changes, the last that are required for KiwiSaver, the landmark workplace saving scheme, to go live in July,” Finance Minister Michael Cullen and Revenue Minister Peter Dunne said today.

“Under the new regulations, the government will pay $40 a year into members’ accounts to subsidise the fees charged by scheme providers.

“The mortgage diversion facility will allow members to divert up to half their contributions to repaying the mortgage on their home, so long as the mortgagee and the scheme provider agree.

“The fee subsidy and the mortgage diversion facility are two of the many incentives designed to make it easier, more attractive and more rewarding for people to save through KiwiSaver. The scheme will help people save more quickly for their first home and enjoy a higher standard of living in retirement.

“The major enhancements to KiwiSaver announced in Budget 2007 – tax credits for contributions and the compulsory employer contribution – will encourage more people to join the scheme and continue to make regular contributions.

“People can be confident KiwiSaver will make a real difference to their long term financial security. KiwiSaver will build the wealth of New Zealanders and provide more kiwi capital to help grow kiwi businesses. It will be good for families and our future prosperity,” said Ministers.

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More KiwiSaver incentives required: Poll

Changes to KiwiSaver announced in this year’s Budget have turbo-charged the semi-sompulsory savings scheme, however they don’t go far enough.
A poll of senior finance industry representatives conducted by Finsia, the Financial Services Institute of Australasia, reveals that majorty of respondent want more incentives in the scheme.


Finsia says that 57% believe “that more incentives are needed to be built into KiwiSaver to meet the aim of improving the New Zealand saving rate and provide capital for future investment.”


Meanwhile, while 23% believe KiwiSaver is sufficient and 20% believe KiwiSaver is ill-equipped to have any significant impact on national savings.


Other findings from the poll are more positive.

  • 53% believe it KiwiSaver changes will raise household savings
  • 49% believe it will create a more secure retirement for Kiwis
  • 44% believe it will address the future costs of an ageing population.

“A clear message from the poll was that further work is required on KiwiSaver,” Finsia chief executive Brian Salter says. “The majority (57%) believe that more incentives are needed to meet the aim of improving the New Zealand saving rate and provide capital for future investment.”

“Finsia supports the notion of a default contribution savings scheme in the New Zealand market to further boost retirement savings. Finsia also supports policies that create a strong and productive economy with a “deeper capital base”. This is crucial for ensuring longer-term financial security for New Zealanders.”

The on-line poll of 61 members of the Financial Services Institute of Australia (Finsia) was conducted between May 25 and 30 by Roy Morgan.

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NZX joins KiwiSaver race

NZX investment subsidiary Smartshares is launching a Kiwisaver scheme.

Called SmartKiwi, the company believes that KiwiSaver will deliver strong benefits to New Zealand’s capital markets, and the economy at large.


The SmartKiwi offering will have three investment options to choose from, a high growth option consisting of equities only, split between NZX and ASX stocks; a balanced option which will be split between equities and bonds; and a conservative option which invests primarily into fixed interest securities.

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Will KiwiSaver force employers to consider

“Employers who struggle to pay KiwiSaver contributions may face a double whammy paying out extra on redundancy payments if they try to downsize,” say Ernst & Young KiwiSaver spokespeople Jo Doolan and Aaron Quintal.Press release – Ernst & Young

“For employees who are members of KiwiSaver, any redundancy payments will be subject to KiwiSaver contributions both by the employee and, from 1 April 2008, the employer”

“For employers who are already thinking they may have to lay people off, but are still hoping to trade through their difficulties, this aspect of KiwiSaver may encourage them to rush through any redundancies prior to 1 April 2008 to avoid this additional cost”

“The outcome is equally unfair on employees. The purpose of a redundancy payment is to tie the worker over until they find a new job. Having 4% disappear out of their redundancy payment by way of a KiwiSaver employee contribution could be an unwelcome surprise at an already stressful time”

“This appears to be an issue that hasn’t been fully considered in the rush to get the revised KiwiSaver package in place. We would hope the Government and their officials could turn their attention to this problem sooner rather than later.

“As with anything new the complexities and wrinkles emerge over time but this is certainly not a case where employers should be sitting back and doing nothing.

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