Close

Employers lukewarm on KiwiSaver auto-enrolment

KiwiSaver continues to be used as a political football – the scheme faces more fiddling with in the form of a proposed auto-enrolment option.

Employers are ambivalent about yet more changes being mooted to the KiwiSaver scheme.

The government is considering introducing automatic enrolment in KiwiSaver for employees who have not changed jobs since it launched in 2007.

Workers are automatically enrolled in the scheme when starting a new job but have the choice to opt out. But those who have remained in the same job since it was introduced must opt in manually.

Prime Minister John Key said the IRD and Treasury would advise on how an auto-enrolment option might work.

According to the KiwiSaver website, there are 1.8 million members in the scheme. Of those, just over 646,000 were automatically enrolled.

BusinessNZ said any decision should be considered carefully before implementation.

“It should be acknowledged that KiwiSaver might not be appropriate for all people in all circumstances," said chief executive Phil O’Reilly.

“Another point to be addressed is KiwiSaver’s tendency to displace a certain amount of existing savings. These factors raise questions about the necessity of making KiwiSaver enrolment automatic at this stage.”

Employers should have a say on the matter, he said in a statement.

“Any sudden change to the scheme would have a significant impact on employers, and those with stretched wage budgets experiencing tight business conditions would find a sudden potential increase in co-funding costs hard to deal with. Compliance costs would also need to be carefully considered.”

The Employers and Manufacturers Association said the "constant fiddling with KiwiSaver" by politicians was a significant cause for concern.

“The feedback from employers, who are responsible for a large chunk of the scheme’s administration as well as paying in employer contributions, is that changes are disruptive and come at a cost to business.

“Plus, the feedback from employees who have not joined KiwiSaver suggests the policy chopping and changing is a factor in putting them off joining the scheme.”

Changes to the scheme in this year's budget included the halving of the member tax credit to $521.43 a year. Minimum employee and employer contributions will rise from 2 percent to 3 percent from April 2013.