Updated 5:53pm: The New Zealand Postal Workers Union is deeply concerned about the 45 per cent sale of Kiwibank.

Sir Michael Cullen has announced NZ Post will be selling 45 per cent of Kiwibank - 25 per cent of which will go to NZ Super, and 20 per cent to ACC.

LISTEN ABOVE: Sir Michael Cullen talks to Larry Williams

It's based on a valuation of Kiwibank at $1.1 billion, which could see New Zealand Post receive nearly $500 million.

"So effectively Kiwibank becomes a new company with three shareholders. NZ Post is the majority shareholder with 55 per cent, NZ Super with 25 percent and ACC with 20 percent, those proportions may change over time," Sir Cullen said.

He said the indicative offer reflects the Government's position that Kiwibank must remain in public ownership.

And he's given an assurance that Kiwibank remains a reliable bank.

"Kiwibank is an extremely sound bank, I have all of my liquid assets in Kiwibank, I am a very nervous insecure elderly investor and I am not going to be withdrawing a single dollar."

The Prime Minister believes that in 20 years time both the ACC and the Superannuation Funds will still be shareholders in Kiwibank which will be a much bigger organisation.

John Key's describing it as an elegant solution to getting more investment in the bank.

"It ticks all the boxes doesn't it. At the end of the day, it stays in one hundred per cent Government ownership. It allows the bank to grow overtime, it has better oversight and therefore better fiscal discipline".

Labour leader Andrew Little said it's a good idea, but safeguards need to be written into legislation.

"The most important thing is that the Government guarantees that if either the current fund or ACC wants to sell its shareholding that they take up the first right of refusal and buy back those shares".

But New Zealand Postal Workers Union president John Maynard said he and other workers feel sick at the uncertainty.

"How do those 500 people feel at NZ Post, hear[ing] that NZ Post is going to get $500 million from the sale of Kiwibank while they, still a week after the public announcement, don't know if they'll be keeping their jobs or not."

Meanwhile the Government is promising KiwiBank will remain 100 per cent Government owned.

Finance Minister Bill English said the proposal ensures the bank remains wholly owned by the Government.

MORE: Bill English talks to Larry Williams

"No sale can occur without Government agreement so, in this case, it's a right of first refusal. This government, if it was offered, the bank would buy it back. We wouldn't sell it outside Government". 

The announcement comes just a week after New Zealand Post Group announced it was planning to cut up to 500 jobs in the next three months, as part of the 1500 to 2000 job losses signalled at the end of 2013.

NZ Post said declining mail volumes and an annual $20 million to $30 million fall in revenue was putting pressure on the business with 60 million fewer letters being sent every year.

Mr Maynard said they understand the shift away from the letter system but feel abandoned.

"Some of the things this company is doing is actually helping the decline of mail, and it's rather significant that the CEO has never reassured the posties they were not deliberately trying to get out of the letter business".

Sir Michael Cullen said that "no deal has been finalised yet and it will take some weeks for a process to be worked through, however we wanted to be proactive in our disclosure".

New Zealand First is on board with the plans for KiwiBank

New Zealand First Leader Winston Peters said if all parties are committed to the deal, and the Government stands by its promise to buy back shares, then his party would not oppose it.

"It's a way of expanding their capital base and frankly, it's not something we would oppose".

Other opposition parties are expressing their reservations over the proposed deal.

Green party Co-Leader James Shaw said it's a step towards future privatisation and has been forced on NZ Post by the Government because of its failure to invest in KiwiBank.

"It'd be interesting to see if a finance minister in five years time, would agree to a statement that a Minister of Finance says today, and that's what we are really concerned about".

Labour MP David Parker is supportive of the option on the table.

But he said it only works if the Government promises to buy back shares if ACC or the Superfund sell them, to ensure the bank remains New Zealand owned.

Mr English has promised the Government will do that.

ACT Leader David Seymour is calling it an odd in-house privatisation and a reshuffling of deck chairs that leaves taxpayers bearing all the risks.

MORE: David Seymour talks to Larry Williams

And he thinks it's because the Government's running scared on asset sales.

"Absolutely they're scared. Partial privatisation was a compromise on privatisation and this is now a compromise on that, where one government entity, so called, sells to another".

Seymour told Larry Williams it's never made commercial or public policy sense to own the bank and he wants to see it sold off completely.

"Wouldn't it be nice to have a government that was prepared to take on some hard issues and take a position and defend it".