A workplace savings regime to be introduced in the Budget will include up-front taxpayer-funded sweeteners, and will be able to be used towards the deposit on a first home.
A spokeswoman for Finance Minister Michael Cullen confirmed a Radio New Zealand report that a modest payment from the Government would
be made when people joined workplace superannuation schemes. It would be the same amount for all new contributors.
Although the schemes are primarily intended for retirement income, they will be able to be drawn on for a first home deposit, attracting another top-up payment from the taxpayer.
Further details will be released in the May 19 Budget.
The workplace superannuation system proposed by a group headed by economist Peter Harris aims to lift membership of workplace schemes from the present 14 per cent of the employed workforce. The Harris group's plan sought to overcome as many as possible of the psychological barriers to joining such schemes.
It recommended that people be automatically enrolled if they changed employer.
Employers would have to offer such schemes, if they had more than five employees, but would not be required to subsidise them.
Employees would be free to opt out. American experience is that schemes that people have to opt out of do better than those people have to opt into. Although existing employees would be free to join, they would not be automatically enrolled, so no one's take-home pay would drop unless they wanted it to.
To avoid the off-putting effect of the employee being spoiled for choice, the employer would choose the fund manager. That element of the scheme is disliked by employers.
But the designers of the scheme have tried to minimise compliance costs to employers by using the tax collection system, just as it is used to gather PAYE, ACC levies and student loan repayments.
All that is required is a different tax code for the employee.
The money will be passed on by the Inland Revenue Department to a central scheme administrator, which will pass it on to the chosen fund manager.
