Key to signal KiwiSaver changes

Prime Minister John Key is to outline the government’s changes to KiwiSaver, Working for Families and – possibly - interest free student loans on Wednesday.

Although the detail looks likely to be postponed until the budget is unveiled on 19 May, Mr Key told this afternoon’s post-Cabinet press conference the direction of any changes would be made clearer on Wednesday.

Mr Key said he would be providing “guidance around KiwiSaver and Working for Families” on Wednesday.

The schemes, introduced by the Labour government in the middle of the last decade, have become “very big schemes, they cost a lot of money” but they also, along with interest-free student loans, are “valued by New Zealanders,” Mr Key said.

“They need to be affordable and they need to be sustainable.”

At present the government puts just over $1.1 billion a year into KiwiSaver funds, with the $1000 kick-start and the $1040 annual tax credit for each saver.

Finance Minister Bill English has previously stated the budget would include something to encourage saving, suggesting that any cutbacks in the KiwiSaver incentives would be used to help fund incentives elsewhere.

Mr Key would not be drawn on that today, however.

“You would want to wait to see what we do on May 19,” he said.

“We have tried as best we can in very limited, very poor economic conditions, to take on board what the Savings Working Group has suggested.”

The working group, set up by the government, suggested reducing the tax paid on earnings from money saved, which is either paid at the saver’s marginal income tax rate or, if the money is saved in a portfolio investment entity (PIE), capped at 28%.

KiwiSaver rules have been changed every year since the scheme was introduced in 2006. The financial services industry has on occasion called for the government to leave the scheme alone for a while, as any change is costly for the firms involved.

The prime minister, however, appears unsympathetic.

Mr Key said the industry had done very well out of KiwiSaver and “it is well placed to cope with these changes.”