Labour wants KiwiSaver rate hike

Last updated 14:44 17/06/2014

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DAVID CUNLIFFE: Labour leader.
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Labour would boost KiwiSaver contributions to 4.5 per cent for employers and 4.5 per cent for employees by 2021, party leader David Cunliffe says.

The move is a shift from the party's 2011 policy, which had 7 per cent on employers against 2 per cent for employees.

The change would be made in small steps of 0.25 per cent a year through to 2021.

Cunliffe confirmed the party's existing policy, which would make the scheme compulsory for employees between 18 and 65.

Students, beneficiaries and the self-employed would be exempt. Those on very low incomes could also opt out, although the level of income has not been set.

Finance spokesman David Parker said in Australia the level was low at $400 a month, but the final figure here would be set after consultation with unions and business

Cunliffe said the process would bring about half a million more savers into the scheme. 

At the moment about $4 billion flows into KiwiSaver accounts each year. If the full 9 per cent contribution rate was in place, that would be about 70 per cent higher.

Parker said the party expected its policy of varying KiwiSaver contributions as a way to control inflation would cut in after 2021, but the transition to 9 per cent contribution rates would also curb inflationary pressures, taking some of the heat out of interest rate rises.

The $1000 kick start and the current $521 a year maximum government subsidy would be retained.

"A Labour government will ensure all New Zealanders have a long-term nest egg and help them grow their KiwiSaver pool by an average of $150,000," Cunliffe said.

The Financial Services Council, which represents investment and life insurance companies, welcomed Labour's plan.

"Only 8 per cent of New Zealanders believe they could live comfortably on NZ Super alone," chief executive Peter Neilson said

"Most ... say they need about two times NZ Super, currently $282 per week for each of a couple, to be comfortable in retirement."

He said for most people, KiwiSaver was their only means of getting to a comfortable retirement and a 9 per cent contribution rate was enough to achieve that after 40 years saving even for someone on the minimum wage.

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Finance Minister Bill English said the Government believed the current 3 per cent plus 3 per cent contribution rate was "about right", and it was not considering increasing it.

Most people who could save were in the scheme, and Labour was looking at pushing people into it who could not save, he said.

''Then they make it very complicated by making exemptions," English said. "It won't add much to savings, if anything.

"They could end up forcing people to save more than they should."

The Government's policy of auto-enrolment for KiwiSaver gave people who could not save the option of leaving the scheme.

There are currently 2.3 million people in the scheme, English said and about 15,000 were joining each month.

English challenged Labour to explain to low income earners why it would effectively take 9 per cent of their income off them when they were living on tight margins.

He predicted Labour would spend the next three months leading up to the election back-tracking on its KiwiSaver policy.

- Stuff

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