Written By: - Date published: 7:56 am, May 29th, 2008 - 57 comments
Categories: articles, election 2008, election funding, john key, slippery, workers' rights -
Tags: cheese, kiwisaver
I noticed an interesting comment from Ferdinand in our Kiwisaver thread yesterday:
I signed up to Kiwisaver based on the 4% employer contribution being rolled out. If National cap that at 1% then I’m out of pocket by about $75,000 in contributions alone.
That got me thinking about that meaningless phrase John Key used to describe National’s position on Kiwisaver: “pretty similar”. WTF?
So I had a think about it. Key could mean “pretty similar” to the current situation of a 1% empoyer contribution or perhaps “pretty similar” to the plan to put it up to 2% next year.
Now if you are a worker on an average wage of $45,000 with 40 years of working life ahead of you then the first scenario means you lose about $140,000 in contributions and interest. If it’s the second you lose about $90,000.
That’s a lot of money so I’m not surprised Ferdinand is concerned about what Key means and I’m sure the other 629,999 Kiwis signed up for this scheme will be too.
With so much at risk you would hope National would be sending a clear message about where they stand but I guess that’s just not something they do.
Think about it: 630,000 people with up to $140,000 to lose each. That’s a lot of cheese.
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IrishBill: surely employers will just reduce pay increases to compensate ?
Bryan, I’m glad to see you have such a low opinion of employers’ integrity.
Can we get a graph of 1% vs 4% up on this post for an average worker over the span of say 45 years?
Assuming that JK means by “pretty similar” to what it is now means it will stay at 1% indefinitely.
Seriously?
How much are the taxpayers and employers out of pocket who have to compulsariliy subsidise KiwiSlaver?
National’s line if this turns out to be more than speculation will be `we’ll return [some of] the difference to workers in tax cuts, and they can invest it in KiwiSaver or the investment scheme of their choice.’
The whole `KateGate’ thing could have been neutralised if Key had simply backed his Industrial Relations spokeswoman and said something like this, rather than the failed coverup-retraction.
L
Er my comment was for Bryan
sheesh you fullas have a funny way of looking at things. How on earth can you ‘lose’ something you never had ffs?
And why on earth you would trust a govt to not alter the rules I do not know – history has proven that to be foolish time and time and time again.
Slow down cowboy and wait for the actual detail. There is still a load of time till the election.
IishBill: so if Labour has such a high level of confidence in employers integrity why do they have to compel them to contribute to Kiwisaver ? I think National Party policy should be to remove the compulsion and let employers/employees act like grownups and negotiate their own arrangements. Yes, yes I know John Key doesn’t want to ‘scare the horses’.
sheesh you fullas have a funny way of looking at things. How on earth can you ‘lose’ something you never had ffs?
The same way National and its supporters moan about the cancellation of the “chewing gum” tax cuts?
Slow down cowboy and wait for the actual detail. There is still a load of time till the election.
Kiwis are trying to plan for their retirements. This is not just a game that National’s playing here.
The word compulsion is revered by the socialists.
Reduce taxes and let the salary earners plan for their retirement. If some people are foolish/stupid enough not to put money aside for later years, it’s their problem, not mine.
Of course, this entails the exercise of individual responsibility, a concept despised by the Left, who would prefer the state taking care of every aspect of the workers’ lives.
On the face of it, I would favour reducing the need for employer compulsion too – let businesses offer additional Kiwisaver payments as a way of attracting workers, no? This might fluctuate according to the economic climate though…
No, its not a game. So, instead of making wild fantasy maybe’s, why don’t you wait until the actual detail has been released. Who knows, National might not win the election.
erikter, the word you’re looking for isn’t ‘foolish’ or ‘stupid’, it’s ‘poor’.
Stephen, the market has proven to be an abject failure in this regard. That’s why we needed Kiwisaver in the first place.
Kiwisaver is going to hit businesses hard. I am self employed and am not planning to employee anyone at the moment. I look after businesses though who do have employees and are dreading this.
Why can people not save for themselves? Why does the govt always have to step in and impose costs on everyone else? It’s hard enough as it is.
I’m not in Kiwisaver.
EDIT: I like what someone else said, why not let the businesses set the rate? Then, one employer would have a good benefit over another employer.
infused, why not move to Australia and pay 9% instead?
Face it, as tough as it is to run a business under any conditions, you’ve got some of the lowest labour costs in the developed world, a staunchly neoliberal employment regime and live in the second easiest country in the world in which to do business.
EDIT: I like what someone else said, why not let the businesses set the rate? Then, one employer would have a good benefit over another employer.
Because they’d mostly set them at zero, and the only people who will benefit are the minority of mobile, highly skilled and largely highly paid workers who have individual bargaining power.
Tane said “That’s why we needed Kiwisaver in the first place.”
I thought that was why we needed superann in the first place Tane. Or is this another first place? And what will be the next first place – an investment property for each worker perhaps? Apologies for the flippancy but it seems to be the appropriate response…
vto, you’re incoherent.
A ‘failure’ in what sense? I know plenty of companies offered superannuation schemes before hand, but I admittedly have no idea of the scope or level of generosity. A lot of companies also *didn’t*, which I can see as being something of a problem. Now employers have an additional cost, which can be offset by the $20 a week rebate the government will give to employers, although this will be worthy bugger all to employers with high wage earners. ALTHOUGH, if you have high wage earners, you’re probably a ‘company’, which means you’re eligible for the company tax reductions, unlike non-companies (sole proprietorships etc..)
Slightly convoluted would be a good captcha
Bryan. it’s illegal to lower wages to cover Kiwisaver contributions.
According to economic theory in the long run, yes, the kiwisaver contributions from employers would be partially offest by smaller wage growth but, on the other hand, employer contributions will be partially offset by higher wages -so they even out.
Incidentally, 630,000 poeple losing $140,000 would be 6.3 billion 1 kg blocks of Mainland Mild from Woolworths, or $88 billion.
Bryan, I see in the Dom that employers are already lobbying National to create policy that would allow them to take KS contributions out of wages. I never claimed labour has a believe in employers’ integrity as I don’t know if they do or not. I know I don’t and today’s article hasn’t made me reconsider that opinion.
Maybe i was slightly incoherent too…on balance, it looks like a slight negative for employers, though I suppose they can hold back wage increases .
you are
ha ha. Incoherency was my first point about this thread.
captcha: of Cinderella, how appropriate
As far as I recall, the whole reason KiwiSaver was set up was because very few New Zealanders were saving for their retirement. While it’s not compulsory to join, the incentives are strong enough that we already have 630,000 people in New Zealand saving with KiwiSaver schemes. This is fantastic.
My younger brother has recently left high school and is working only a bit above the minimum wage, but he is still able to afford to contribute, and for the first time in his life is seriously saving money. This is a great thing, and I really doubt he would have joined without the incentives provided in KiwiSaver Mark II.
Given that employers are also getting significant tax breaks to help cover the cost of KiwiSaver contributions, I’d say that the whole picture of it being a drain on employers isn’t so clear. If anyone has the numbers (and graphing skills!) around this, I’d really appreciate it.
Sure, we’re not getting the 9% that Australian employers are forced to contribute, but I think what we’ve got is a great start.
IB
Firstly, I agree that National should send a clear message on their KiwiSaver policy. Voters should be able to make an informed choice.
Think about it: 630,000 people with up tp $140,000 to lose each. That’s a lot of cheese.
That statement is technically correct, but it’s highly misleading. Many KiwiSavers have nothing to lose if employer contributions are changed: Under-65 retirees for one, and public servants who are ineligible for the employer contributions as they are already receiving them in another scheme. I’ll bet a large proportion of KiwiSavers fall into those two categories.
What Cullen should really answer, or you can have a go if you like, is this: Why should a relative of mine, who has retired well short of 60 because she planned superbly for it, be able to join KiwiSaver with it’s $1000 kick-start and $20 a week from the government (provided she puts in $20 a week as well)? She is kicking back, enjoying her retirement, and being partially subsidised by the working poor to do so. How is that acceptable?
“… the market has proven to be an abject failure in this regard. That’s why we needed Kiwisaver in the first place.”
Wages rising in tight labour markets, like we have right now, is a market working exactly as it should.
If you want to play jam-jar economics with peoples incomes and insist on Kiwisaver, that’s your prerogative. Me, I’d rather make it easier for employers to offer a wider range of incentives to staff – cark parking, medical insurance, low interest loans, super, vehicles for private use, so on and so forth.
though I suppose they can hold back wage increases .
How’s that supposed to be a selling point in the market place like you’re suggesting then?
Forgive my stream of consciousness method of posting, it gets me into trouble sometimes.
Wasn’t…one of the Ministers talking about trying get around employers holding back wage increases through legislation somehow?
Trevor Mallard a month or so back. Several high profile employers had told staff they’d be taking Kiwisaver out of their wages. The cheek of it, especially when the government is subsidising employer contributions.
But if they’re only getting up to $20 a week in subsidies, that is really NOT going to cut it for a lot of people.
[and any contributions above $20 a week are tax deductible. An average fulltime income of $46,000 sees $1840 a year of employer contributions at 4%, $1040 of that is covered by the $20 a week, $240 by tax deductibility. The employer is being required to contribute just $560 net a year for an employee on that average fulltime wage. Hardly an overwhelming burden. SP]
Stephen: as previously stated, at the current employer contribution the subsidy covers an employee making around $59k per annum. How many people isn’t it cutting it for? We’ve already seen that the majority of workers in the country make far less than that.
sean: She is kicking back, enjoying her retirement, and being partially subsidised by the working poor to do so. How is that acceptable?
There are two ways to design and implement government programmes. You can make them simple and clear, open to everyone, and you live with a certain percentage of anomalies. Or you can make them complex and regulated, and create a big bureaucracy, and live with a smaller percentage of anomalies. I guess it’s an open question as to which is cheaper in the long run, but I and I think many others prefer the first approach.
Or in other words if the working poor weren’t subsidising your relative, they would be subsidising the big bureaucracy that was necessary to exclude her, and you’d be grumbling about that instead.
Steve – that almost requires a new post. There is a lot of confusion over the “burden” that is being placed on the employer.
In fact, in your scenario, I would think that the extra paperwork soaks up more money than the contribution