Fund managers and business groups are not panicking about changes to KiwiSaver, despite news that both employers and employees will have to lift their contribution.
Prime Minister John Key confirmed in a pre-Budget speech yesterday that the Government would reduce the KiwiSaver Member Tax Credit - the subsidy it pays to savers in the programme. Individuals and employers would be expected to make up the difference, he said.
Under the present tax credit, the Government matches contributions by up to $1042.86 each year, which works out to about $20 a week.
Key will reveal the gravity of the cuts in next Thursday's Budget.
The plan aimed to reduce the amount the Government has to borrow to subsidise personal savings, he said.
Key said any changes would not be introduced until at least after the November election and until New Zealand's economy improved.
The Government's $1000 kickstart, given to savers who join the scheme, would remain in place, he said.
Fisher Funds managing director Carmel Fisher said she was relaxed about the announcement.
"I'd rather there not be tinkering, but it's not as bad as it could have been and there will still be some incentive [to be in the scheme] so it doesn't render KiwiSaver absolutely useless," she said.
"I also applaud the theme [of his speech], which is to say that the Government is putting in less because it can't afford to keep on contributing, but we will be encouraging individuals to [respond] and put more in for their own savings.
"That's the strategic thrust which National has been talking about and at least they've adhered to it."
ANZ Wealth managing director John Body said the Government's plan appeared reasonable.
"Any changes that are designed to make the scheme more sustainable for the long term are welcome," Body said.
"We understand the Government was compelled to review its current financial liabilities this year and the KiwiSaver incentives form part of these liabilities. Changes to the member tax credits are the most sensible area for the Government to review its liabilities."
Chairman of industry group Workplace Savings David Ireland could see the rationale behind the move.
"Yes, it's going to reduced, but you don't need to be a rocket scientist to see the numbers - if we get 1.7 million [people] invested in KiwiSaver with a member tax credit of over $1000, the [cost] is going to get pretty big," he said.
BusinessNZ chief executive Phil O'Reilly said the saving scheme appeared to be unsustainable and so changes to the Government's contribution were a step in the right direction.
"We've always been concerned about the affordability of KiwiSaver from a Government perspective, it did seem unaffordable to us and it did seem like we were subsiding a particular form of saving when other forms would have been more relevant. Any move to make [KiwiSaver] more affordable is a good thing."
O'Reilly said he would wait and see how much the Government planned to increase employer contributions before commenting more.
Chief executive of the the Employers & Manufacturers Association Alasdair Thompson was not concerned by the plans.
"From an employer perspective, I don't think it's unreasonable to ask employers to [raise contributions]. Most countries in the developed world where there is a state-sponsored super scheme have contributions [above present levels]."
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