Government Amends KiwiSaver To Increase Flexibility

Author:Ms Rachel Taylor, David Johnston, Alasdair McBeth, Tracey Cross, Nicole MacFarlane, Tom Barnes and Natalie Manning
Profession:DLA Piper
 
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The Government will shortly be finalising a number of changes to KiwiSaver. KiwiSaver has now been operating in New Zealand for over 12 years and is becoming an increasingly important feature of the New Zealand market. While the changes introduced do not reflect a significant change in the overall KiwiSaver framework, they do support the general trend of KiwiSaver becoming an increasingly flexible vehicle for savings and personal wealth planning, as well as for retirement. We expect further refinements to KiwiSaver over time and see a number of trends emerging including KiwiSaver providers considering how KiwiSaver funds can be better invested, for example in private equity or in infrastructure.

The Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill (Bill) has been reported back from the Finance and Expenditure Select Committee (Select Committee). Among other things, this taxation omnibus bill seeks to simplify and modernise the Government's social policy administration with implications for KiwiSaver. There are also changes to the Prescribed Investor Rates (PIR), and the employee share schemes rules. A summary of the most significant changes in the Bill are below.

Amendments to the KiwiSaver Act 2006

New withdrawal category for members with life-shortening congenital conditions

Following the introduction of the Bill, a subsequent Supplementary Order Paper (SOP) was introduced proposing further changes to the KiwiSaver Act 2006 to create a new withdrawal category for members with life-shortening congenital conditions. The Select Committee recommended that the SOP be incorporated into the Bill (with some minor adjustments). The amendments would allow qualifying members to withdraw their savings before they reach the age of 65 and therefore allow those members to spend a portion of their adult life in retirement. While the draft Regulations have not yet been released, members will automatically qualify for withdrawal if they have a condition named in the Regulations, and members that have a condition not named in the Regulations will be able to apply to their KiwiSaver for withdrawal under an alternative process. Members who elect to make a congenital condition withdrawal will not be prevented from continuing in paid employment, Crown contributions and compulsory employer contributions will cease. Should the amendments be passed, questions may arise in future as to whether there should be further amendments to the KiwiSaver Act...

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