KiwiSaver should soak up about $9.5 billion in contributions this financial year, according to estimates released last week in a budget that held few surprises for the financial services sector.
‘Wellbeing Budget’ figures show the annual KiwiSaver member tax credit (MTC) cost should creep above $1 billion in the 2022/23 fiscal year, up about $30 million on the previous period in a move that dampens fears of government tinkering with the subsidy.
It is understood that a proposal to link the annual MTC – of a maximum $521 or so each year – to member contributions above the minimum mandated level (currently 3 per cent) was on the table.
“The increase in this appropriation for 2022/23 is mainly due to an expected increase in the number of contributing members,” the budget document says. “It also reflects increased entitlement through contribution growth from members previously qualifying for less than the full entitlement.”
At the same time, the budget forecasts about $8.5 billion to flow from employees and employers to KiwiSaver providers through the Inland Revenue Department (IRD) plumbing over the latest annual period compared to just $7.7 billion over the 2021/22 year.
Almost all KiwiSaver contributions enter via the IRD system with the new budget numbers suggesting rising inflows might soften the blow of volatile markets to provider assets under management – if the government employment and wage increase assumptions hold up.
The roughly $800 million of forecast extra KiwiSaver contributions for the 2022/23 period “reflects growth in the number of contributing members and income growth of those members”, the budget paper says.
Elsewhere the budget confirms ongoing contributions to the NZ Superannuation Fund while also committing $100 million to a quasi private equity fund for small-to-medium enterprises (SMEs) to be executed in a public-private partnership with mainstream banks.
Minister for Small Business (and formerly of Revenue), Stuart Nash, said in a release: “Banks that own the Fund could refer SMEs to it where equity finance would be more appropriate than debt finance. The Fund would be an active investor focused on providing growth capital, and wraparound capability support, like strategic support and access to a talent network, to SMEs.
“The Fund would always be a minority investor with a seat on the board, offering guidance and expertise but always leaving owners in control. As such owners are less worried about takeovers, leaving more solid businesses open to investment and expansion.”
However, the government has yet to release detailed plans on how the SME fund would operate in practice.