Labour restates universal KiwiSaver commitment

Labour says lowest income New Zealanders would be exempt from its plan to make KiwiSaver compulsory and increased contributions for workers and bosses would boost the scheme's savings by about 70 per cent.

Leader David Cunliffe this morning restated his party's commitment to "universal"or compulsory KiwiSaver.

"KiwiSaver's worked, it's been a great success, it's been a win-win for savers and the savings sector", Mr Cunliffe told reporters at Parliament this morning.

"It's increased our national savings and made long term saving part of the life of some two million New Zealanders but we need to extend it to those who are currently missing out and increase the contribution rate so those nest eggs grow faster."

A Labour Government would from October next year lift minimum contributions to the savings scheme by a quarter of a percentage point each year from 3 to 4.5 per cent by 2021 for both employers and employees.

Finances spokesman David Parker said Labour's policy would increase KiwiSaver savings by about 70 per cent.

"It's a very significant increase in national savings."

In addition, from next October, all employees not already in the scheme would be automatically enrolled.

Labour expects auto-enrolment would bring a further half a million people into the scheme.

"Most of those are low income earners who are missing out on getting their fair share of government contributions", Mr Cunliffe said.

Students, beneficiaries, the self-employed and low income earners would be exempt -- but the details of the minimum threshold will be subject to consultation.

However Mr Parker indicated the income threshold for being forced into the scheme would be very low, pointing to Australia's A$400 a month threshold.

Mr Cunliffe acknowledged that "saving a few per cent will stretch the budgets of some of our poor families and that's why we will have an exemption for people on low incomes".

"There will be a few who in the short term are very hard up and we'll consult on where that level should be.

"But the solution is not for people on low incomes to miss out. The solution is better jobs and higher wage so that all kiwis can afford to save a retirement nest egg."

He said lower paid workers would be assisted via Labour's policies to increase the minimum wage, support the living wage campaign and to support businesses to create more high skilled, higher paying jobs.

Labour would retain KiwiSaver's $1000 kickstart and government contributions of up to $521 a year.

It has previously announced it would put in place a variable savings rate for KiwiSaver to help control inflation. The variable savings rate would be overlaid onto the contributions increases outlined this morning.

Mr Parker said it was unlikely the Reserve Bank would use the variable savings rate before contributions reached 4.5 per cent in 2021.

"During this period where we're building universal KiwiSaver there will be less inflationary pressure in the economy because there will be less consumption.

"Once you get to those higher rates of saving you can still use a variable rate of savings, the exact amount of which would be spelled out in the policy targets agreement between the Government and RBNZ."

Mr Cunliffe said it was possible the increase in contributions by employers would be offset against wage increases.

- by Adam Bennett, NZ Herald

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