KEY POINTS:
Several big employers are jumping straight to 4 per cent contributions to their employees' superannuation, ahead of the 2011 deadline under the KiwiSaver scheme.
A leading KiwiSaver provider, Tim Jenkins of Mercers, says a number of employers plan to follow the lead set by Air New Zealand and
the NZ Stock Exchange in going straight to 4 per cent contributions from both employers and employees from July 1, when KiwiSaver starts.
The new scheme only requires employers to contribute 1 per cent of their employees' gross incomes from next April, rising to 4 per cent from 2011, although employees are required to chip in a minimum of 4 per cent from the start.
Fletcher Building will contribute 2 per cent from the start for employees who pay in at least 4 per cent, rising to 3 per cent from 2010 and 4 per cent from 2011 as required by the new law.
Its human resources executive, Peter Merry, said the company decided on the 2 per cent employer's contribution before last month's Budget.
"We are starting early," Mr Merry said.
"Our employees are getting 2 per cent from July 1," he said.
Mercers, who manage about a quarter of New Zealand's existing employer-based super schemes, said before the Budget that only about a third of existing schemes would be modified to comply with KiwiSaver rules.
The other two-thirds would continue unchanged alongside KiwiSaver as an option for new employees.
Yesterday Mr Jenkins said the Budget promise of matching Government subsidies for both employer and employee contributions of up to $20 a week was tempting most employers with existing schemes into a rethink.
Some looked likely to modify part of their existing schemes to become "KiwiSaver-compliant" by locking new contributions of 4 per cent on both sides in until age 65. Contributions above that from either side would continue to be accessible when an employee left the company, as at present.
"Some others are saying you can choose between our scheme, which is more generous than 4 plus 4, versus KiwiSaver where you get the $1000 Government kick-start and the $1040 a year subsidy," Mr Jenkins said. "You choose which you prefer."
However, several major employers looked likely to close entry to their existing schemes from July 1 while they evaluated what to do in the long term. "For many, they are looking to see what is legislated about the employer contributions," he said.
"There have been so many changes to KiwiSaver that it's a brave employer who acts on draft legislation."
Submissions on the Taxation (Annual Rates, Business Taxation, KiwiSaver and Remedial Matters) Bill are due by July 12.
Social Development Minister David Benson-Pope yesterday played down fears that people applying for welfare benefits might have to use up their KiwiSaver nest-eggs before qualifying for benefits.
Wellington People's Centre benefit rights manager Kay Brereton warned that could be the effect of a proposed change in the Social Security Act, now before Parliament, that applicants should "where appropriate ... use the resources available to them before seeking financial support".
The KiwiSaver scheme allows people to withdraw all funds in their accounts if they fall seriously ill.
They can also withdraw their own contributions and their employers' contributions, but not the Government's $1000 kick-start or subsidies, in cases of "significant financial hardship".
Ms Brereton said that, although the Government might not intend to make people use up their KiwiSaver nest-eggs before getting benefits at present, the proposed law change would allow a future Government to do that.
But Mr Benson-Pope said main benefits were income-tested, not asset-tested, and supplementary assistance such as special needs grants were asset-tested but funds locked up in KiwiSaver schemes were exempted.
"However, if someone had already withdrawn funds early from a KiwiSaver provider, or they reach the age of 65 and are consequently eligible to access their KiwiSaver funds, then this money is available to them and can be treated as a cash asset for the purposes of supplementary - hardship - assistance eligibility."
