KiwiSaver popularity still climbing as changes loom

Timothy Geithner
Timothy Geithner
Kiwisaver continues to climb in popularity as changes to the scheme containing the retirement savings of 1.7 million New Zealanders become increasingly likely.

The Budget tomorrow will contain changes to KiwiSaver, which is subsidised substantially by the Government.

Around half of the $8 billion in KiwiSaver funds has come from the Government through the $1000 start-up contribution and the weekly contribution of up to $20 to match the contribution of savers.

Finance Minister Bill English has said the Government could not afford to keep borrowing to pay for KiwiSaver. It is likely increased contributions from employers and employees will be phased in as the Government contributions are reduced.

In a move similar to what the New Zealand Government is likely to announce tomorrow, United States Treasury Secretary Timothy Geithner said he would immediately halt investments in two large Government pension plans so the Government could continue to borrow money.

Mr Geithner informed Congress of his decision in a letter stating the Government had officially reached its $US14.3 trillion ($NZ18.3 trillion) borrowing limit. He repeated a warning, if lawmakers did not increase the borrowing limit by August 2, the Government was at risk of an unprecedented default on its debt.

The debt limit is the amount of money the Government can borrow to help finance its operations. Reuters reported the US had reached its debt limit because the federal Government had grown accustomed to borrowing massive amounts of money. The latest estimate was that it borrowed US40c for every $US1 it spent.

Republicans had said they would not vote to raise the borrowing limit until Congress and the White House agreed on a plan to reduce the deficit through spending cuts.

An ASB investor confidence survey showed those expecting KiwiSaver to be their main source of retirement funding reached a high of 62% in the three months ended March.

Respondents using KiwiSaver climbed 5% to 43%, another high, ASB private banking and wealth management head Jonathan Beale said.

"Over the past year, KiwiSaver has climbed from last place to third-equal in return perceptions, the highest level yet.

"After almost four years of contributions from individuals, employers and the Government, investors are starting to sit up and take notice of KiwiSaver."

Fund balances were growing, and the KiwiSaver scheme had proven to be a successful way of turning around the poor savings habits of many New Zealanders, he said.

ASB expected there to be some change in perception of investors after this week's Budget, which the Government had confirmed would include reductions to the member tax credit and provisions for increased contributions from members and employers.

"We believe KiwiSaver is still likely to remain the most popular retirement savings vehicle for respondents in our survey," Mr Beale said.

 

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