The market is rife with speculation that the National Government will make substantial changes to the KiwiSaver Scheme.
At press time, Prime Minister John Key said that the Government may withdraw the Government’s $1000 kick-start to new members after the General Election due to be held on November 26, 2011. This could become effective from April 1, 2012.
The Labour Government launched the KiwiSaver Scheme five years ago. It has enabled an increasing number of young families to buy their first home, without other savings or very little savings.
Kiwi Saver allows the use of the money saved, towards a deposit for a first home. In addition, Kiwis are also entitled to a one-time grant of up to $5000.
Many young families aspire to own their own home and for new migrants, it provides added security and a feeling of better settlement. Becoming a homeowner would seem like an unlikely dream for many people on a tight budget, especially when banks tighten credit criteria.
As a mortgage broker, we have successfully processed many applications for families with little savings in the past few months, using their KiwiSaver deposit. In many other cases, we have helped people enroll into the Scheme.
Among them was a couple, who had no savings at all, except KiwiSaver. The couple found it difficult to put away regular savings otherwise from their limited income.
They lived as an extended family, the members of which were free to ask them for financial help when needed.
KiwiSaver came to their rescue. Apart from having their own home, their children can look forward to owning their own homes in the future.
The current lending criteria at most banks require at least a 5% deposit, an average family with Kiwi Saver would have approx $15,000 saved after three years.
With the first home subsidy generously provided by the Government, the total money available for a first home deposit could be $21,000.
This would enable a family to buy a home for about $400,000 without any other savings in place.
I hope that the Government would not tinker with the KiwiSaver Scheme, which has accrued benefits to more than a million New Zealanders.
Hamish Patel is an insurance and mortgage adviser for mortgagesonline.co.nz and can be contacted on (09) 6254693. Email: hamish@monline.co.nz. The above should be taken only as a guideline and not as specific advice. A full disclosure statement is available on request.
