KiwiSaver Budget Measures Act 2015
KiwiSaver Budget Measures Act 2015 repeals the Crown's $1,000 one-off kick-start payment to new enrolments.
The KiwiSaver Budget Measures Bill was introduced under urgency on 21 May 2015, passing through all stages that same day. It received Royal assent on 27 May 2015, bringing into force the repeal of the Crown's $1,000 one-off kick-start payment to new enrolments as announced in Budget 2015.
The Act amends the KiwiSaver Act 2006.
Repeal of the KiwiSaver kick-start payment
Sections 223(4), 226(1), 226(3), 226(1B), 226(1C), 240 and Schedule 1 of the KiwiSaver Act 2006
As part of Budget 2015, the $1,000 Crown contribution paid to all new KiwiSaver members (the kick-start) was repealed, effective from 2pm on 21 May.
One objective of KiwiSaver is to boost the retirement savings of individuals who would otherwise not be in a position to enjoy standards of living in retirement similar to those in pre-retirement.
The KiwiSaver Act 2006 includes several subsidies to encourage additional savings but these subsidies are poorly targeted as the scheme is open to all New Zealand residents. Furthermore, there is evidence to suggest that members have simply shifted savings from one product to KiwiSaver, rather than made additional savings as a result of the subsidies. Removing the kick-start for new enrolments in KiwiSaver is intended to reduce the cost of the scheme and improve its value for money.
The main features of the new rules are as follows.
The kick-start is repealed from 2pm on 21 May 2015.
The requirement for providers to retain the kick-start when a member makes an early withdrawal for a first home has been replaced with a requirement to retain $1,000 in the member's account so that it remains open.
The Commissioner has discretion to determine when the three-month wait-period for paying the $1,000 KiwiSaver kick-start contribution begins.1 Whether this date is before or after the repeal of the kick-start determines eligibility.
Individuals can join KiwiSaver by:
- being automatically enrolled when they start employment or opting in at any time via their employer (employer enrolments); or
- opting-in via their KiwiSaver provider (provider enrolment).
Before enactment of the KiwiSaver Budget Measures Bill, enrolment under the KiwiSaver Act 2006 took effect on the earliest of the date the Commissioner received a person's first contribution or the date the Commissioner was notified or otherwise knew that the person had become a member of KiwiSaver.
In practice, this meant enrolment under the employment methods took effect when Inland Revenue received an enrolled person's first KiwiSaver deductions, and enrolment via a provider occurred when the individual's account was opened. Inland Revenue was required to pay the kick-start contribution as soon as practicable, three months after the person became a KiwiSaver member.
Under the new rules, eligibility for the kick-start turns on whether an individual was enrolled by 2pm on 21 May. However, there can be some uncertainty around the exact time and date when an individual has enrolled. To ensure everyone who is entitled to the kick-start receives it, the KiwiSaver Budget Measures Act provides the Commissioner with discretion to determine when the three-month wait-period for paying out the kick-start began.
As KiwiSaver, income tax and all other deductions made from an employee's pay are processed monthly via an Employer Monthly Schedule, section 226 has been amended, effective from 1 May, to ensure that the Commissioner's discretion applies to anyone who incurred their first KiwiSaver deductions in May.
Non-compliance with financial markets legislation
Under new section 240, KiwiSaver providers are not at risk of being in breach of securities law or the Fair Trading Act 1986 in relation to documents that had already been issued.
Prospectuses and investment statements issued by providers under the Securities Act 1978 will not have to reflect the changes made in the KiwiSaver Budget Measures Act 2015 if they were issued before 22 July 2015.
Product disclosure statements issued under the Financial Markets Conduct Act 2013 will not have to be updated to reflect the changes made in the KiwiSaver Budget Measures Act 2015 until 22 July 2015.
Non-compliance with the Fair Trading Act 1986 is ignored to the extent that the non-compliance results from changes made in the KiwiSaver Budget Measures Act 2015 and does not continue on or after 22 July 2015. This ensures that advertisements that may refer to the kick-start are not immediately in breach of the Fair Trading Act 1986 after the kick-start's repeal.
The new Commissioner's discretion came into force on 1 May 2015. The remaining changes came into force at 2pm on 21 May 2015.
1 The kick-start is not paid in the first three months to allow a member to choose to opt-out if they have been automatically enrolled, or to select a KiwiSaver scheme before the Commissioner allocates them to a default provider.