New Zealanders Embrace KiwiSaver Scheme

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

27 October 2009

New Zealand’s Revenue Minister, Peter Dunne, has said that the second annual evaluation of the tax-advantaged KiwiSaver programme, released by the Inland Revenue, highlights just how much people have embraced the savings scheme.

"We saw KiwiSaver's membership reach almost 1.2 million people (as at end-September 2009), with growth of 54% in that second year," Dunne announced, continuing: "That means about 32,000 people joining every month."

He said it was particularly significant to see the number of young people taking responsibility for saving for their future.

"The uptake has been good across the board, but it‘s particularly notable among people aged from 19 through to their mid-20s," he added.

He disclosed that, in the year to June 2009, NZD2.1bn (USD1.6bn) in contributions from members, employers and the government were passed to providers for investment, representing more than double the amount for the first year. In total, NZD3.15bn in contributions were transferred to providers in the scheme's first two years - or NZD4.25bn to the end of September this year.

The evaluation report also looked at members' contribution rates, which included the changes in April 2009. It found that of those who joined KiwiSaver since the changes, approximately half were contributing at the minimum 2% rate. However, most of those who joined before April 2009 have not changed their contribution rate.

KiwiSaver is a voluntary, work-based savings initiative to help with long-term saving for retirement (in addition to the state superannuation).

There are a range of membership benefits, including an initial NZD1,000 kick-start from the government, regular contributions from employers and an annual member tax credit paid by the government, which matches an individual’s contribution up to a maximum of NZD1,042.86 per year.

KiwiSaver schemes are managed by private sector companies. KiwiSaver is not guaranteed by the government, as investment choices are made by the individual. KiwiSaver savings will generally by locked in until state pensionable age (currently 65), but savings may be able to be withdrawn in certain circumstances, e.g. for buying a first home.

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