Smith Lockwood: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
Smith Lockwood: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
[Volume:644;Page:13729] 
Dr the Hon LOCKWOOD SMITH (National—Rodney) 
: 
 The Opposition would really appreciate the Government responding to some of the concerns that are being raised—for example the concern expressed by my colleague Chris Tremain about the age limitation on the KiwiSaver provisions in the Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill. 
The select committee was asked many times by people making submissions why the provisions were restricted to people above the age of 18. If we want to develop a savings culture in New Zealand if we want to encourage saving at a younger age when people first start to work—and of course they can legally work at age 17—why not enable them to be part of the full KiwiSaver scheme when they can legally work in New Zealand? If the Government is serious about supporting a savings culture with this now quite complex KiwiSaver scheme it seems wrong to tell young new workers that sorry they cannot become part of the full KiwiSaver scheme until they are 18. Where is the logic in that? 
If the Minister stood up and said that at the end of the day it was a revenue issue that the whole scheme was costing a lot of money and that if the Government lowered the age of eligibility down to 17 or 16 it would cost too much money I could understand that. I could understand the Government making a pragmatic decision about the revenue cost because KiwiSaver is going to cost the Government a lot of money over the next few years—a lot of money—and there are very significant revenue issues. But we need to understand why we do not let people be part of the KiwiSaver scheme when they start work. It is very clearly spelt out in clause 219 where the age of entitlement is specified. National members are at a loss to understand why new workers cannot get into the KiwiSaver scheme when they first start work. It seems bizarre that they cannot do that at whatever age they can legally start work. That is the first issue and we would really appreciate hearing the Government’s explanation. 
The second issue is covered in the transitional provisions of clause 237. Members on the select committee listened to submissions—often from unions particularly the Council of Trade Unions—that argued quite strongly that the 4 percent contribution from employees is a big ask for low-income earners. Middle and higher income earners already save. One of the big issues with the KiwiSaver scheme—if it is to work properly—is whether it can help lower-income people to start saving and to get the benefits of saving. So many submissions to the select committee stated that 4 percent is a big ask for middle to low income earners. 
Many of them asked why we would not allow flexibility whereby an employer could agree with an employee as part of a remuneration package to make a greater contribution thus allowing the employee to put in say 2 percent rather than the full 4 percent. The Government partially responded to this question by saying that as a transitional measure it would allow an employee to put in 2 percent for 2 years if the employer agreed to put in 2 percent—rather than 1 percent which is the standard rule for employers that is set out in this legislation. It said it would allow that transitional provision for 2 years then in the third year the employee would put in 3 percent to be matched by 3 percent from the employer. 
The issue is that the transitional measure is not recognising the position of low to middle income earning New Zealanders. A lot of our people are in that area. People do not realise that the average income of New Zealanders is about $10000 a year higher then the median income from memory. It is significantly higher. If we look at the median income of New Zealanders we see that it is somewhere down in the $30000 to $38000 range. It is a huge ask to expect people with families to contribute 4 percent of that gross pay to this scheme. 
We should hear from the Government why it was unacceptable to it to have employers agree to make up the difference as part of a total remuneration deal and why it refused to listen to the representations from the unions that it allow a more flexible scheme.