Greater protection for savers in super schemes
The government is proposing further changes to super schemes in line with its aim of encouraging greater savings, Finance Minister Michael Cullen, Commerce Minister Lianne Dalziel, State Services Minister Annette King and Revenue Minister Peter Dunne announced today.
"The amendments we propose will give those in super schemes that comply with KiwiSaver rules more protection and allow savers better access to their funds in retirement," the Ministers said.
"It is important that existing schemes which wish to become KiwiSaver-complying face the same rules as KiwiSaver schemes."
The Ministers said the changes were a small but significant fine-tuning of proposed KiwiSaver legislation.
"The ideal time to make these adjustments is now, while a Bill dealing with KiwiSaver legislation is before Parliament."
The changes include:
- Requiring complying funds as well as KiwiSaver funds to lodge employer participation agreements with the Government Actuary. Employer participation agreements set out conditions under which employees are scheme members. This measure will give greater protection to employees, by ensuring there is government oversight of employers' involvement in these funds.
- Allowing benefits in complying superannuation funds to be withdrawn as a lump sum. This will give members of complying schemes the choice of taking a lump sum or buying an annuity when they are eligible to access their savings, a provision which already applies to KiwiSaver schemes. As legislation stands, members of complying superannuation funds may be forced to buy annuities at extra cost.
- Avoiding "double-dipping". Members of some existing superannuation schemes in the State sector already receive a contribution from the Crown as their employer. This will continue unchanged. However the legislation will be amended to provide extra assurance that if these people also join KiwiSaver they will not be able to receive additional employer contributions.
As well, as previously announced, the legislation will be amended to make sure that people receive the member tax credit of up to $20 a week from the time they join KiwiSaver. As the legislation is currently worded, some KiwiSaver members would not become eligible for the tax credit until several weeks after they began making contributions.
Under the proposed law change, the member tax credit will apply from the first of the month in which the contribution is made, so that, for example, all contributions that begin in July will be matched by a tax credit from 1 July.
"We are confident these changes will further strengthen KiwiSaver, and make it a more attractive proposition for New Zealanders wishing to secure a more comfortable retirement," said the Ministers.
The changes will be added to the Taxation (Annual Rates, Business Taxation, KiwiSaver and Remedial Matters) Bill, which is currently before Parliament.
Contact: Mike Jaspers, press secretary to Dr Cullen, 04 471 9412 or 021 270 9013 [email protected]