KiwiSaver Employee and employer contribution rates
(Clauses 96, 154, 157 and 159)
Summary of proposed amendment
The bill amends the KiwiSaver Act 2006 and the Income Tax Act 2007 to increase the default and minimum employee contribution rates for KiwiSaver and complying superannuation funds from 2% to 3% of an employee’s gross salary or wages.
The bill also increases the compulsory employer contribution rate from 2% to 3% of gross salary or wages.
The new employee and employer contribution rates will apply from 1 April 2013.
The minimum employee contribution rate is being increased from 2% to 3% of gross salary or wages from 1 April 2013. The increased rate automatically applies to all employees who have been contributing at a 2% rate to a KiwiSaver scheme or a complying superannuation fund.
The default contribution rate for KiwiSaver members who do not select a rate also increases from 2% to 3% of gross salary or wages from 1 April 2013.
The rate at which compulsory employer contributions are made will increase from 2% to 3% of gross salary or wages, from 1 April 2013.
A provision is included in the bill to protect providers from potential non-compliance with securities enactments in relation to their prospectuses and investment statements following these contribution rate changes. This gives providers time to revise their prospectuses and investment statements to reflect the new rates.
The Government announced changes in Budget 2011 that will see KiwiSaver funds continue to grow, but with a larger share of contributions coming from members and employers, through increased contribution rates, and a lower share from the Government.
Employees who are enrolled in KiwiSaver must pay employee contributions, unless they have taken a contributions holiday. Currently, employee contributions are deducted from salary or wages at a rate of 2%, 4% or 8% of gross salary or wages.
The minimum deduction rate of 2% is increasing to 3% from 1 April 2013. Employees contributing at higher rates (4% or 8%) will be unaffected by the change.
The default contribution rate applies to employees who are automatically enrolled into KiwiSaver when they start new employment, unless they select their own contribution rate. This is the same as the minimum contribution rate, and so will increase to 3% from 1 April 2013.
An employer must pay KiwiSaver employer superannuation contributions for an employee for whom they are required to deduct personal contributions from the employee’s salary or wages. This contribution rate will increase from 2% to 3% of gross salary or wages, from 1 April 2013.
The new contribution rates apply to employer contributions made for, or employee contributions deducted from, an employee’s first payment of salary of wages for a pay period that starts on or after 1 April 2013.