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Finance Minister Michael Cullen is allaying fears that workers who have put years of savings into a retirement fund may find that money frozen as superannuation schemes are wound down in favour of KiwiSaver.
A spokesman for Dr Cullen said a comprehensive "how-to" guide would be sent to
all employers over the next few weeks, telling them how KiwiSaver worked and how to introduce it.
A publicity campaign aimed at workers would start from May 28, aimed at workers.
He said that if a current super scheme had provisions locking the money in until 65, there was no reason it could not easily be a KiwiSaver compliant scheme rather than be closed.
Even if there was no such provision, a worker could not be forced to move to KiwiSaver. "The whole point of KiwiSaver is that it's a voluntary workplace scheme and no one will be forced to save if they don't want to," the spokesman said.
"So to suggest people will suddenly find the conditions of their super scheme has changed is wrong."
If schemes were closed, leaving money sitting in an account until a person turned 65, it would still be earning a return.
Business New Zealand chief executive Phil O'Reilly said employers were unlikely to modify private schemes or run them in tandem with KiwiSaver.
Most small and medium sized businesses were more likely to close their superannuation schemes and let employees join KiwiSaver.
"Out of the options, most will, I think, wind down their schemes in favour of KiwiSaver," he said.
Money from existing schemes may be able to be transferred to KiwiSaver, or it could be frozen until the person reached retirement age.
Businesses must offer KiwiSaver, but they have several ways of meeting their KiwiSaver obligations.
They can:
* Modify their existing scheme to comply with KiwiSaver rules
* Add on KiwiSaver options
* Run existing schemes alongside KiwiSaver
* Wind up their scheme and allow employees to join KiwiSaver.
Or they can apply for an exemption, which will be granted only if the existing superannuation scheme is as good as KiwiSaver, saving at least 4 per cent of the members' earnings.
Only one of New Zealand's 3000 employer superannuation schemes has been exempted from KiwiSaver.
A co-director of the retirement policy and research centre at the University of Auckland, Michael Littlewood, said some schemes might allow members to be paid out, but this would not be common.
"As we've seen in Australia, private schemes will disappear," he said. "In typical schemes employers will say the money is frozen until retirement age or until the employee leaves the company."
Under the Budget changes to KiwiSaver, employers will have to contribute 4 per cent of an employee's salary to their Kiwisaver account, matching the worker's contribution of 4 per cent of earnings.
Both parties will receive a tax rebate of up to $20 a week.
Mr Littlewood said every single employer was now patched into KiwiSaver, and it was "outrageous" that they had only five weeks before the July 1 start date.
"It is a solution looking for a problem," he said. "There's no evidence of a need for this."
