Labour softens KiwiSaver compulsion stance

Labour finance spokesman Grant Robertson say it still wants to make KiwiSaver universal. Photo / Michael Craig.

Labour has softened its plans on how to make KiwiSaver compulsory saying it would consult with unions and business first, if elected into government.

In the run up to the 2014 election Labour's policy was to make KiwiSaver compulsory for every employee aged 18 to 65 to join the scheme from 2014.

Labour finance spokesman Grant Robertson said it was not considering auto enrolment at this stage.

"We think a blunt instrument isn't the way to go."

Robertson said Labour still wanted to make KiwiSaver universal but it recognised those who were not in the scheme were largely on low incomes.

"We are still committed to a universal KiwiSaver.

"The reality is that with 2.8 million people in the scheme now, the majority who are not are low income New Zealanders."

Instead Robertson said it wanted to work with unions and business to bring low-income workers into the scheme.

"We want to develop a scheme, on a tripartite basis with business and unions that brings them into the scheme in a sustainable way and as wages rise."

Exactly how and when this would happen is yet to be worked out.

"That would be determined once the tripartite group had been bought together."

Robertson said it would still exclude students, beneficiaries and self-employed people from having to join KiwiSaver.

He also confirmed the party had scaled back on its plans to lift KiwiSaver contribution rates significantly.

At the last election Labour proposed increasing the employer contribution rate from 3 per cent to 7 per cent over nine years.

Robertson said it still wanted to gradually increase the contribution rate to 4.5 per cent.

Labour has yet to release a policy document on its KiwiSaver or superannuation plans although it has confirmed it would keep the age of eligibility for New Zealand Superannuation at 65.

National announced plans earlier this year to increase the age to 67 in a gradual rise that wouldn't start until July 2037.

It would also decouple KiwiSaver from the age of eligibility meaning people could continue to access their KiwiSaver accounts from age 65.

That prompted a warning from one academic that some people may be forced to live off their KiwiSaver for two years while they wait to get New Zealand Superannuation.

Susan St John, director at Auckland University's Retirement Policy and Research Centre, said people turning 65 may have no choice but to dig into their KiwiSaver if they can't work and the benefit is asset-tested.

"If there is nothing but a welfare benefit that is means tested and KiwiSaver funds are part of that means test then people who can't sustain adequate levels of paid work will have no alternative but to erode their savings pots."

National has ruled out a one-off auto-enrolment for KiwiSaver and is not keen to make the scheme compulsory.

Finance Minister Steven Joyce told the Herald in June it was not up to the Government to force people to save for their retirement because individuals may have better uses for their money.

"The Government encourages people to join but doesn't require it."

"I'm not a fan of removing that ability for people to choose and decide for themselves."

KiwiSaver architect and former Labour finance minister Sir Michael Cullen has said the scheme should be made compulsory to prevent widening inequality at retirement.