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Confident or foolish?

Written By: - Date published: 8:30 am, October 14th, 2008 - 20 comments
Categories: election 2008, kiwisaver, national - Tags:

So, you’re one of the 900,000 Kiwis who have so far signed up to Kiwisaver. You know that you get $1000 on signing up, you put in 4% of your gross income, the Government matches that up to $20 a week, and your employer matches with at least 1% rising to 4% by 2011. It’s the best investment deal around. You’re smart and sensible to have signed up. You’ll get a nice big retirement nestegg and you are helping to create a domestic savings pool so we don’t have to borrow as much from overseas to grow.

Well, that’s what you thought. National would turn the 4% Kiwisaver into a 2% system. If that happens, you’re going to lose 2% a year from employer contributions come 2011, you’re going to lose some of your government contributions if your income is below $52,000, and you might find your employer gives you a smaller payrise to pay so that you end up paying for the employer contributions too. That great savings scheme just got a whole lot less great. Let’s look at the minimum amount of money you would lose as a Kiwisaver with National over and above any extra money you might get from National’s tax cuts.

National’s tax package amounts to taking up to $27 a week off 900,000 Kiwis (and hundreds of thousands more on incomes between $14,000 and $44,000 who get bigger tax cuts from Labour) to give big tax cuts to a wealth few. Basically, they’re junking at least a million votes, many of whom would be swing voters, for the sake of giving a 1-3% increase in after-tax income to their base. They must be very confident or extremely foolhardy.

20 comments on “Confident or foolish? ”

  1. Razorlight 1

    It would be be very nice if the employer contibution was 5% or even 6% matched by equal contibutions from the government.

    But we all know this is unaffordable.

    The changes to the system make for a safer system that will be more affordable for all, employers, employees and the state.

  2. vidiot 2

    Gee Steve – did you wake up on the wrong side of Helen this morning or what ?

    National would turn the 4% Kiwisaver into a 2% system. If that happens, you’re going to lose 2% a year from employer contributions come 2011…

    Just because the National party would allow a minimum 2% employer contribution doesn’t mean that all employers are going to only ever do 2% – there are good employers out there that will look after it’s workers and who are already doing 4%.

    I would rather have a system in place today that can be expanded on, vs the ‘let’s bankrupt the country now’ policies & systems in place today. With the world economy in it’s current ‘tits up’ state, it’s fiscally prudent to curtail expenses.

    You state that there are 900,000 people signed up to Kiwi saver – how many of these are active savers ? How many are children under the age of 18 ? How many of these were ‘insta-sign on’s’ that have now opted out of the scheme ?

    you are helping to create a domestic savings pool so we don’t have to borrow as much from overseas to grow.

    Again wishful thinking, how much of the current independently administered KiwiSaver funds are currently tied up in domestic investments?

  3. Dom 3

    Razorlight – can you explain what you mean? How will it be safer or more affordable?

  4. Vidiot,

    Would you rely on the goodness of the person holding the purse strings.
    If employers would be so good no laws would be needed protecting workers rights. There would be no poverty and everybody would be wearing flowers in their hair. LOL.

    Not happening is it?

  5. Razorlight 5

    I mean in a time of e huge economic uncertainty and in light of the pre election economic and fiscal update, not all of Labours generous policies of the past 9 years are sustainable.

    Some will need to be pegged back to survive and an obvious one is kiwisaver. At a time when the government and business are going to struggle to balance the books, Nationals policy looks alot more sensible.

  6. vidiot 6

    Dom – fairly easy to see what he/she is saying…

    The changes to the system make for a safer system that will be more affordable for all, employers, employees and the state.

    When it comes to the credit crunch, people look for ways to reduce their spending/weekly commitments. Currently the dilemma is do I put 4% (or 8%) in to my KiwiSaver or do I suspend my payments to it and use that money to pay for my rising fuel costs, food costs, etc. By offering a 2% option, it’s a hedge your bets/safer solution – I can stay in the KS scheme and I can afford those luxuries of life that I need on a weekly basis.

    Where Razorlight is wrong though is that it will cost companies the same next year as what it did this year. With the canning of the KS rebate, the cost to the employers is same same, ie they currently pay 4%, 2% of which is rebated back by the Govt. Under National they pay a minimum of 2% and get no rebate.

  7. Pat 7

    I have signed lots of clients and their families into KiwiSaver. A large proportion are not on PAYE so are not affected by changing the 4% threshold.

    Self-employed, housewives, beneficiaries, children, students, semi-retired.

    A lot of PAYE earners have not joined KiwiSaver because they can’t afford 4% out of their pay, but have signed up their kids instead.

  8. Daveski 8

    The success of this strategy relies on the fact that more people will be able to afford to enter at 2% than 4% (regardless of employer contribution).

    Because so many here are fixated on the view that anything that Key does must be bad, there is no acknowledgement that potentially this could not only benefit more people (in the long run) but specifically those who aren’t able to afford it at present.

    I would have also thought given the financial crisis that any attempts to moderate current policies would have been applauded.

    SP so how much of KS will be invested in NZ?

  9. vidiot 9

    travellerev – there are good and bad employers out there. I guess I have been lucky in the fact that the last 3 companies I have worked for were 2, 6 & 14+ year terms. There are companies that go out of their way to ensure that their employees are happy (see: Google as an example), and there are crap ones too.

    I know of companies that have opted in to KS big time, every one that signed up immediately got 4% from the company. They then approached the staff that had not signed up, asked why not, and then paid those employees an additional 4%, so that they did not feel left out.

    Now you can either encourage companies to take on this positive attitude to their staff or you can vilify them. And sadly, the left seems to be quite content on doing the later for all of them. Without business/employers we have nothing but a total reliance on state hand outs.

  10. I don’t know how much is domestically invested but i would have thought the lion’s share. the stuff that is invested overseas sees profits following into nz, that’s a good thing too.

    The 4% system hasn’t been a barrier to 900,000 people signing up at a rate of 60,000 a month. more conintue to join every day.

    The system is affordable, if we don’t give open ended tax cuts to the rich as National wants to do. remember, national isn’t saying ‘oops not enough money for kiwisaver’, the money is there but national’s just doing something else with it – taking money out of kiwisaver and giving it to the wealthy instead.

  11. vidiot 11

    SP – you are a tad naive.

    a) you assume that the Lions share is invested domestically – I guess you need to base this with actual figures and not your hunch work.

    b) ‘more continue to join each day’ – NSS ? If I change jobs, I am automatically enrolled in KS. So the numbers were increasing, now go back and see if you can dig up the real figures and answer the real questions – How many of these are active savers ? How many are children under the age of 18 ? How many of these were ‘insta-sign on’s’ that have now opted out of the scheme ?

    c) The system isn’t affordable, look at the PREFU – the money has gone, 9 years of the best economic conditions we have ever had has been pissed away. And what do we have to show for it ? 4 rusty trains, 2 rusty ships, a fleet of airplanes – a gutted defence force and a reliance on hand outs.

    And the money isn’t just going to the wealthy either, it’s going to the AVERAGE tax payer. Now if you can’t be employed in a job that rewards you the AVERAGE wage, I suggest that you look strongly at moving to Bangaldesh.

  12. As pointed out recently by retirement expert Mary Holm Kiwi saver will still be pretty good under National and will now be affordable for even the lowest paid via the 2% option.

    Of course its true that the middle classes won’t have as big a pile of cash as the 4% or 8% employer contributions would have eventually given them but those lower down will be getting a slice of the action instead. I was always surprised that Cullen didn’t make a 2% option part of the scheme but I guess he was too busy buying the middle class vote and considers Labour has an entitlement to the working class vote so stuff’em I guess.

    Meanwhile if you’re one of the many of the offspring of the middle class going to Uni- guess what: $700 million (Treasury’s estimate not Labours claim of $210 million) of borrowed free booze money for you! Yeah!
    Your children’s children will have to pay for it..but fuck’em, eh?

    Investment tip: Invest in bars around Universities- gold plated AAA+ guaranteed high yield return over the next few years.

  13. Pat 13

    “I don’t know how much is domestically invested but i would have thought the lion’s share”.

    AMP Growth Fund: 55% International Shares, 4% International Fixed Interest.
    AMP Balanced Fund – 40%, 15%.
    AMP Conservative Fund – 17%, 20%

  14. Felix 14

    How touching, Richard Hurst thinks students should have to borrow to pay their rent.

  15. Andrew 15

    “How touching, Richard Hurst thinks students should have to borrow to pay their rent.”

    why not borrow to pay rent? It’s interest free. I had 4 years at uni, my first 2 without a student allowance. I managed by getting a couple of part time jobs. You only spend 24 weeks out of the year at uni, plus exams of course … so why not work for the other time?

    oh thats right, it’s far easier to sit on your fat ass and do nothing because the state will pay for you!

  16. Draco T Bastard 16

    I was always surprised that Cullen didn’t make a 2% option…

    He looked at it but the sums didn’t add up. No point having a retirement scheme that costs more to run than is being put in to it.

  17. Pat 17

    Mary Holm (surely the undisputed expert on KiwiSaver?) has summed up the proposed KiwiSaver changes today in Stuff:

    “Winners and losers under National’s KiwiSaver changes”

    She actually sees some benefits of National’s policy, particularly making it more affordable for more employees to join.

  18. KiwiGirl 18

    An interesting read on the Herald website.

    “Susan St John: Labour, National must agree to KiwiSaver review” especially the bit about no matter how one puts a scheme together, the richer will benefit more than the poorer.

  19. Spider_Pig 19

    “to give big tax cuts to a wealth (sic) few”.

    Yes, the wealthy (oh, let’s say the 15% of taxpayers who earn over $60,000 p.a.).

    The same “wealth few” that pays 55% of all income tax.

    That the left then uses to distribute in some perverse money-go-round to not only provide for other peoples retirement, but also to provide your own retirement.

    I little bit of gratitude of our largesse would be appreciated, you sanctimonious fuckwits

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