The KiwiSaver ‘HomeStart’ legislation passed its third reading in Parliament last week, introducing just one minor amendment recommended by the Finance and Expenditure Committee (FEC).
In its report published on March 13, the FEC called for transitional disclosure relief for KiwiSaver providers on the new HomeStart rules.
“Providers of securities would still need to update their documents within the next year [by April 1, 2016],” the FEC report says.
While the HomeStart provisions are scheduled to take effect on April 1 this year, the legislation is unlikely to be officially on the statute books before
Alasdair McBeth, DLA Piper partner, said the late passage of the legislation creates a potential problem for providers of “having to disclose something that’s not there”.
“But I haven’t heard of any operational problems from KiwiSaver providers,” McBeth said.
The HomeStart legislation would enable eligible KiwiSaver members to withdraw virtually all their savings, plus access a government subsidy, to purchase residential property.
“We considered whether the legislation should also allow first-home buyers to withdraw the $1,000 kick-start contribution, but note that this could mean that members’ accounts were left with a nil balance, and automatically closed,” the FEC report says. “We consider it desirable for members to remain in the scheme and see pragmatic benefits in leaving the kick-start contribution as a residual balance to ensure that accounts remain open.”
While the Labour Party supported the HomeStart legislation, it also criticised the policy in a FEC minority view, saying the regime allowed KiwiSaver members to sacrifice their retirement savings in exchange for an amount “equivalent to less than a month of Auckland house inflation”.
“As the Treasury and Reserve Bank have advised, increasing subsidies to homebuyers in a market that is badly supply-constrained is likely to drive prices higher,” the Labour FEC view says. “Our most serious concern with the HomeStart policy… is that it amounts to tinkering when the housing crisis requires fundamental reform.”
Across the Tasman, Treasurer Joe Hockey’s proposal to open up its superannuation system to home-purchase withdrawals has also come under fire.