Annual Report 2008: Part one - Policy, legislation and major initiatives

KiwiSaver

The government's voluntary savings initiative, KiwiSaver, started on 1 July 2007. More than 716,000 people joined KiwiSaver in the first year, well above the original forecast of 186,000. The percentage of automatically enrolled people opting out - at 33% - has also been significantly lower than the forecast of 84%. Automatic enrolment has also had a positive impact on the number of young people being enrolled and staying in KiwiSaver.

Figure 2 -
KiwiSaver membership

Process implementation

KiwiSaver works with 54 schemes, 31 providers and over 70,000 employers with KiwiSaver members. We have continued to maintain good relationships with employers and scheme providers.

The large, early up-take of KiwiSaver had a significant impact on Inland Revenue, providing particular challenges for our IT systems, processes and people. However, our customer satisfaction result of 77% reflects our effort to make sure the scheme operated successfully.

By the end of June 2008:

• we had received over 3.4 million employee deductions on employer monthly schedules
• over 93% of the KiwiSaver deductions (due no later than 20 June 2008) were finalised for transfer to providers or for refunding to individuals who had opted out. By the end of July 2008 we had finalised 98% of the deductions.

There were some timing delays in processing employee deductions due to insufficient or inaccurate information being provided. We also experienced some process and systems issues, which were largely resolved by January 2008.

Contributions

Under the KiwiSaver Act 2006, Inland Revenue holds all funds for the first three months of membership. From 1 October 2007 we began to pass the first member and Crown contributions to providers through a business-to-business electronic interface. By 30 June 2008, we had transferred more than $1 billion in member and Crown contributions. Crown contributions represent 55% of funds passed to providers in the first year. This percentage will fall over time, as the value of member contributions rises and fewer kick-start payments are made.

Figure 3 -
KiwiSaver funds to providers to 30 June 2008

Compulsory employer contributions were introduced on 1 April 2008. Employers also became eligible for an employer tax credit of up to $20 per week per member if they contributed to a KiwiSaver or complying fund scheme on behalf of their employees.

From 1 July 2008, schemes can claim a member tax credit of up to $1,042.86 per year for members who meet the eligibility criteria. The actual value of the credit per member depends on their length of membership and the value of their contributions. All systems and processes were successfully put in place to ensure the timely processing of these claims.

²  Membership numbers are net of opt-outs

Other pages in: Part one - Policy, legislation and major initiatives

• Advising on government policy
• Business tax review

Date published: 15 May 2009

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