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KiwiSaver changes: the sting in the tail of the Budget

Finance Minister Bill English said [1] a package of measures costing $790 million over four years, aimed at reducing hardship among children in New Zealand’s lowest-income households is at the heart of new spending announced in the Budget on 21 May 2015.

The package includes more childcare support for low-income families, a $25 a week increase in benefit rates for families with children, an increase in Working for Families payments to low-income families not on a benefit, and increased work obligations for sole parents on a benefit. The ‘package’ starts 1 April 2016.

Starting at 2pm on 21 May 2015,[2] the Government removed the $1,000 Kick-start for new members, saving more than $500 million over the next four years. Axing the Kickstart will fund more than two thirds of the new spending announced in the “package’ for families.

In round numbers, of our 4.6 million population, 600,000 are aged 65+ so don’t qualify for the KiwiSaver KickStart, and 2.5 million under the age of 65 are already members – meaning just about everyone who can afford to set aside 2% or 3% of their income is already a KiwiSaver.

The remaining 1.5 million who are not KiwiSavers are mainly people who can’t afford to save 3% of their income for their retirement, and their children.

So: families who can’t afford to save, and young people not yet working so not in a position to save, are indirectly paying to themselves most of the ‘package of measures to reduce hardship’.[3]

This is the sting in the tail of the Budget. The poorest families are funding their promised increase in incomes with a reduction in their retirement incomes.