Question: New Zealand’s budget for 2015 has just been released and I don’t have enough time to flick through all the documents.So can you please just tell me how this affects my Kiwisaver if at all?
The New Zealand budget for 2015 is riddled with high hopes and expectations: a $790 million child hardship package, $1.7 billion for public health services, $680 million for education, rebuilding Christchurch and capital funding. While this is great, money doesn’t just come out of thin air.
No, this money needs to come from somewhere. And it might just come from you. Prior to the Budget’s announcement, any person joining Kiwisaver was given a $1000 kickstart three months after Inland Revenue receives the first contribution or notification of membership.
This “kickstart” was free money deposited into the persons’ account to use towards either a new home or retirement. However if you join Kiwisaver after 2pm on the 21st of May 2015, you are not eligible for this kickstart. This is the cut-off date when the Government announced the budget.
But what if I joined Kiwisaver on the 20th of May? Does the three month rule still apply? Or do I not get the kickstart?
Great question! This cut should not affect you as you had already joined Kiwisaver and had been promised the kickstart. This cut only affects new members. This also unfortunately may affect those who experienced delayed signing up.
This also affects Kiwisaver as a whole. Parents have often been eager to sign their kids up for Kiwisaver just to get the bonus $1000. Now this scheme could face a serious drop of enrollments. This could hinder Kiwisaver’s potential.
Cutting the kickstart is expected to save the Government $500 million over the next four years. The kickstart program has costed taxpayers over $2.8 billion since it’s inception. So this means it could end out saving you money. However don’t expect a tax cut any time soon!
The budget has also had a ripple effect on another area of Kiwisaver: mass-auto enrollment is now more affordable. According to Radio NZ, The Government previously planned to automatically enrol all workers, irrespective of whether they were starting a new job, but still with an opt-out clause. It was forced to drop the proposal, however, as it was too expensive.
Finance Minister Bill English is keen to get this onboard now. He claimed the Government will work on this proposal within the next six to twelve months.
However ex Green Part co leader Metiria Turei is not so optimistic. “It’ll be a double blow to [low income earners]. No $1000 kickstart to make it worthwhile, and money taken out of their pay, and they don’t know how to stop it,”
In short: If you already have a Kiwisaver set up, you are safe. However be aware of impending policy change.