The managing director of one the newest KiwiSaver schemes, Amanah KiwiSaver Plan, said the Government's decision to remove the $1000 kickstart incentive to join a scheme has disadvantaged many members of the Islamic community.
Auckland barrister Brian Henry said Kiwsaver had excluded the Islamic community because they had high ethical requirements for any investment and the incentive had been pulled soon after Amanah Kiwisaver had been launched in January by Ethnic Affairs minister Sam Lotu-Iiga.
Promotion of the scheme at mosques had been going only for a couple of months. It had 400 signed up members in that time and had $1.5 million in investments which were Sharia compliant and had been approved by a committee of Islamic leaders and scholars.
Mr Henry has written to Prime Minister John Key protesting at the changes - which have already been passed into law under urgency.
"Under their ethical rules they do no invest in money lending, interest-based products (known as usury to Christian); alcohol, gambling, machines of war, pornography, tobacco and no pork," the letter said.
He said the launch of the scheme was a proud moment for the Islamic community and they were dismayed to have lost the $1000 kickstart before the offer had time to be understood by the many who sought a high level of ethics in relation to where they invested their money.
"They have - by your Budget decision - been penalized just when, for the first time, they had the opportunity to stand beside their fellow Kiwi citizens and provide for their future retirement."
Mr Henry, who has represented Winston Peters and Shane Jones in the past, said he still had a full-time law practice.
He did not make any money from the scheme but he saw a social need that needed to be filled.
The chairman of the scheme's advisory board was former Race Relations Conciliator Gregory Fortuin who was also acting in a voluntary capacity.
Amanah Ethical is the trade name of a company that runs the KiwiSaver scheme and a unit trust, Amanah New Zealand, which is also Sharia compliant.
Labour finance spokesman Grant Robertson says the Amanah case is a good example of where there are groups of New Zealanders who have not yet joined and for whom the $1000 kickstart would have been a really important factor.
"To build that savings culture in New Zealand requires a lot of different pathways."
Low-income people and younger people in particular needed incentives to join when interest rates were so low.
"Now here's another group of people who for religious and cultural reasons hadn't had a vehicle they were comfortable with and has only just got itself up and going and they, too, are missing out on the payment that kickstarts them into savings."
Mr Robertson and Labour leader Andrew Little have both said Labour would reinstate kickstart.
"It was our policy a day before the Budget and it's our policy a day after the Budget." Mr Robertson said.
However there would be issues around whether those who had missed out on the payment from now until when it was reinstated could be compensated.
It was possible that they could get payments in over time.
Ditching kickstart was forecast to save the Government $500 million over four years.