Finance Minister Nicola Willis has flagged a KiwiSaver tinker ahead in the 2025 budget slated for this Thursday amid growing fears of cuts to the government co-contribution.
In a speech last week, Willis confirmed KiwiSaver was in the frame for adjustments in the upcoming non lolly scramble.
“I’m delighted to see how many Kiwis are embracing KiwiSaver as a way of saving – for a first home and to supplement their income in retirement,” she said in the speech.
“… I want to see KiwiSaver balances continue to grow and our Budget will contain steps to support that mission.”
However, speculation has been mounting that the growth steps could involve slashing, or means-testing, the so-called ‘member tax credit’ – or MTC – that provides KiwiSaver members with a maximum $521 (and a few cents) government top-up each year.
The MTC is the sole remaining KiwiSaver incentive after previous National governments halved the annual top-up, removed the employer contribution component tax relief, dropped the $1,000 ‘kickstart’ payment and ended a fee subsidy.
During the last financial year, the MTC cost government about $990 million leavened by more than $590 million of tax collected on KiwiSaver investment returns.
If all eligible KiwiSaver members had contributed up to the minimum amount, the MTC budget expense would’ve landed on about $1.5 billion.
Other potential budget moves include a schedule to raise minimum mandatory KiwiSaver contributions over a multi-year period in line with the Australian superannuation example.
However, industry insiders suggest the recent market volatility may have prompted the government to scale-back or delay the contributions increase plan.
In a statement last week, Financial Services Council chief, Kirk Hope, urged the government to take care before making even “small policy changes” to KiwiSaver settings.
“KiwiSaver is an essential component of financial security for New Zealanders, fulfilling its purpose of retirement preparedness and ensuring long-term financial wellbeing,” Hope said.
“Any consideration of cutting KiwiSaver contributions risks undermining this critical tool. We ask decisionmakers to consider the financial resilience of our communities, and to work with the KiwiSaver sector to protect the integrity of KiwiSaver for the benefit of all.”
The KiwiSaver budget calls would also have a flow-on effect to scheme valuations amid expected consolidation in the market.
Harbour Asset Management owner, FirstCape, for example, has been eyeing up potential KiwiSaver and other financial service targets with several names including AMP, Generate and Consilium pinging on the rumour radar.
Willis has confirmed one budget change, however, where the government-run venture capital multi-manager outfit, Elevate, will receive an extra $100 million.
She said the extra Elevate money would come from $61 million diverted from annual contributions to the NZ Superannuation Fund (NZS) and $39 million sourced from the 2025 budget “capital allowance”.
Elevate was originally funded in 2021 from a mix of $240 million of NZS contributions and $60 million of new money.