19 Oct 2011

English says no plan to make KiwiSaver compulsory

4:50 am on 19 October 2011

Finance Minister Bill English says the Government would not make KiwiSaver membership compulsory, as it would put some people under too much financial pressure.

Mr English announced on Tuesday that if re-elected in November, National is likely to move towards auto enrolment for all employees in 2014.

However, people would still have the choice of opting out of the savings scheme. At present, only new employees are automatically enrolled.

Mr English says he does not believe that making KiwiSaver compulsory is needed, as some people are in other schemes or simply cannot afford it.

Automatic enrolment would only happen if the Government can return the books to surplus by the 2014-15 financial year, he says.

At present, the Government provides $1000 kick-start payment and ongoing annual member tax credits for people who join KiwiSaver.

Depending on the uptake and design, officials estimate the cost of auto enrolment would be up to $550 million over four years.

Mr English says that is based on the assumption that about 55% of employees would stay enrolled in the scheme.

Business New Zealand chief executive Phil O'Reilly says the Government also needs to consider businesses financial health in coming to a decision on timing.

"If we are going to have some sort of soft compulsion regime, then I think the Government really needs to think about having a discussion with employers on timing on that so it doesn't impact employment and it doesn't impact company profitability."

The general election will be held on 26 November.