KiwiSaver ‘protection’ bill faces chop

Saturday, 16 March 2024

Labour MP Tracey McLellan will speak at the Finance and Expenditure Select Committee in defence of her KiwiSaver protection bill next week.

Labour’s Tracey McLellan’s KiwiSaver “protection” bill isn’t going to get past the select committee.

Her Employment Relations (Protection for KiwiSaver Members) Amendment Bill got through its first reading in August last year with the support of National MPs and will be scrutinised by MPs at a Finance and Expenditure Committee hearing next week.

The bill, if it became law, would turn the clock back to the early days of KiwiSaver, when employers had to make matching contributions of 3% to the KiwiSaver accounts of workers who decided to contribute to the scheme.

A law change when National took power in 2008 created what Labour called “loopholes” that allowed employers to strike individual agreements with employees under which they could deduct their employer contributions from those employees’ salaries.

Critics, including ACT, which was in opposition at the time of the first reading, said McLellan’s proposal would add cost to business and interfere with workers’ freedom to negotiate employment agreements with employers.

Law firm Lane Neave said McLellan’s bill would mean employers would no longer be able to adopt a “salary sacrifice” or “total remuneration model” under which the employer’s KiwiSaver contributions were deducted from their workers’ pay, rather than being in addition to their pay.

Commerce and Consumer Affairs Minister Andrew Bayly wants to get more out of KiwiSaver.

National MPs voted while in opposition to allow the bill to go to the select committee, but Commerce and Consumer Affairs Minister Andrew Bayly signalled the bill would get no further.

However, he said the issues it raised would be discussed in the second half of the year as part of the review of capital markets and KiwiSaver settings, which he signalled in January.

Total remuneration models became popular after 2008. A study by the Retirement Commission found that almost half of employers used a total remuneration model for at least some employees, Lane Neave said.

Reverting to the original protections would add costs for the significant number of employers offsetting compulsory contributions to employee KiwiSaver funds through total remuneration packages, the law firm said.

Commerce and Consumer Affairs Minister Andrew Bayly signals review of KiwiSaver.

“By removing the legal basis for total remuneration models, employers would be required to make KiwiSaver contributions in addition to ordinary pay,” Lane Neave said.

McLellan said her “sensible” bill sought to restore protections put in place when KiwiSaver was created.

“Most employers do the right thing,” she said.

The power differential between workers and businesses meant it was not always feasible for people to push back against total remuneration packages, she said.

Business NZ opposed the bill, while the Council of Trade Unions supported it.

Concerns have been raised that KiwiSaver isn’t working as well as it might with many workers making little or no contribution to it. Some people earning their money from the KiwiSaver and savings industry have warned that it could leave many with low levels of retirement savings.

However, in speaking against the bill in August, ACT MP Chris Baillie, now no longer in Parliament, said some workers preferred to use their wages to do things like pay off debt rather than invest it in KiwiSaver.

Last year, the Financial Markets Authority Te Mana Tātai Hokohoko recorded that of the 3.25 million people in KiwiSaver, 1.13 million of them were classed as “non-contributing”.

Workplace Relations Minister Brooke van Velden has set out a plan of employment law reform which would strengthen the ‘freedom’ for workers to agree to be employed as contractors.

Retirement Commissioner Jane Wrightson, who supported the “intent” of McLellan’s bill, is among those who have called for a review of KiwiSaver.

On Tuesday night Workplace Relations Minister Brooke van Velden signalled the Government’s plans to reform employment law to increase “flexibility” and the “freedom to contract for workers and businesses”.

“To lift productivity and drive economic growth we need flexible workplaces and regulation, where businesses have the certainty and confidence to innovate and grow, and employees have the freedom to agree on terms that work for them and their unique contexts,” van Velden said in a speech to the Auckland Business Chamber.

She also bemoaned extra costs imposed on businesses by the last government that she said had made it more expensive to hire people.

She cited increases to the minimum wage of nearly twice the rate of inflation, the introduction of an additional public holiday, and doubling sick leave entitlements.