Incentives Encourage KiwiSaver Growth

by Mary Swire, Tax-News.com, Hong Kong

05 August 2010

A survey on KiwiSaver, issued by New Zealand’s Inland Revenue, shows that the retirement scheme is encouraging people into longer-term savings towards their pensions, with two-thirds citing the government’s incentives as a reason for enrolling.

KiwiSaver is available as a voluntary means of saving for retirement. Contributions are deducted from a person’s salary at the chosen rate of 2%, 4% or 8%, and invested in a KiwiSaver scheme. The government makes a NZD1,000 (USD735) tax-free contribution at the start of a person’s KiwiSaver account, and also matches an individual’s contribution by up to a maximum of approximately the same amount each year. Employers also have to contribute an amount equal to 2% of a person’s annual contributions.

The survey asked why people were members or not, how they viewed or used the KiwiSaver features that encouraged them to save, and whether KiwiSaver was an extra savings mechanism for their retirement.

72% of KiwiSaver members said one of the main reasons for joining KiwiSaver was that it is an easy way to save, and 67% said the government contributions were a reason for enrolling. The home-ownership feature, whereby early withdrawal of part of the savings can be available when a person is buying a first home, was also given as a reason for joining by 24%.

Peter Dunne, the Revenue Minister, pointed out that the survey shows encouraging signs that New Zealanders are beginning to take a longer-term view towards retirement saving.

"Kiwis have traditionally not been committed to long-term saving,” he said. “In the past most people have put money into a mortgage hoping for a capital return at a later date. What this survey shows is that individuals are starting to think about a longer-term strategy for saving money outside the property market."

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