Budget unlikely to change KiwiSaver savings levels

Research commissioned by the Investment Savings and Insurance Association (ISI) shows that while few New Zealanders support the KiwiSaver changes announced in the Budget, most are likely to remain committed to the scheme.

Not surprisingly, the HorizonPoll survey found that 75% of those surveyed supported the Government’s decision to retain the $1,000 “kickstart”. However the decision to reduce other incentives, and shift more of the onus for savings onto the individual, received far less support.

Some 44% of respondents supported the Government’s decision to increase the default minimum contributions from 2% to 3% for both employees and employers, while only 29% supported the halving of the Member Tax Credit from $1,042 p.a. to $521 p.a. with 44% opposed.

Interestingly, the change least supported was the decision to make employer contributions taxable from 1 April 2012, with only 20% of respondents supporting this move and 52% opposed.

However, despite this lack of support, only 9.8% of existing KiwiSavers indicated they were likely to take a “contribution holiday” following the changes.

The survey found that some 65% of households now have one or more KiwiSaver members in them. Of some concern is that of the 27.2% of respondents not currently enrolled in the Scheme who had been considering joining prior to the Budget announcement, only 10.3% have indicated an interest following the Budget whereas the other 16.9% would not now join.

On the upside, 2.7% of people who hadn’t considered joining prior to the Budget indicated that they might now join.

“What this indicates to us is that those people already in KiwiSaver are likely to stick with the Scheme and take the default option to increase contributions,” says ISI CEO Peter Neilson.

“While 9.8% have signalled an interest in taking a contribution holiday, many will not do this because they will have to take active steps to do so, and we’ve already seen a high level of inertia when it comes to decisions around KiwiSaver.”

While the changes are likely to have minimal impact on the existing level of KiwiSavers, Mr Neilson says the largest impact is likely to be in the area of attracting new members, with fewer people indicating an interest in joining the Scheme in the aftermath of the Budget.

“A compulsory day of enrolment with the option to opt out afterwards is likely to be highly successful, and this is on the Government’s work programme following the Savings Working Group’s report.”