National costs you $100,000 from your retirement fund

Written By: - Date published: 9:49 am, July 2nd, 2016 - 66 comments
Categories: accountability, class war, national, superannuation - Tags: , , ,

If you’re an average worker the actions of the National government have reduced the value of your KiwiSaver fund at retirement by about $100K:

National’s cuts shave $100K off KiwiSaver by retirement

Press Release: New Zealand Labour Party

New analysis shows National’s constant cuts to KiwiSaver will reduce the average worker’s retirement savings by $100,000 over their working life, Leader of the Opposition Andrew Little says.

“The former Labour Government launched KiwiSaver nine years ago today to boost the country’s savings and ensure all New Zealanders have a nest egg in their retirement.

“National has gutted KiwiSaver. Since coming to office it has made five separate cuts to the scheme:

• Taxed employer contributions

• Halved the maximum Member Tax Credit from $1042 to $521

• Halved the Member Tax Credit rate from $1 for every dollar saved to 50c

• Reduced employee/employer contributions from 4 per cent to 3 per cent

• Abolished the kick-start payment

“Analysis by the Parliamentary Library (attached) shows a worker on the average wage joining the scheme today will have total contributions of $3500 after their first year. That would have been $6700 without these cuts.

“After their first year, the average worker misses out on $2,200 a year in contributions. That adds up to $100,000 the average worker will miss out on if they retire after 45 years’ work. That’s a big slice of their nest egg.

“Axing the start-up payment alone resulted in new KiwiSaver sign-ups plummeting.

“Figures released this week show growing inequality under this Government. National’s KiwSaver cuts are making inequality worse by making it harder for middle New Zealand to save.

“For many people, KiwiSaver is their largest financial asset outside their home – if they’re lucky enough to own one. Having less savings in their scheme means people will be forced to work for longer and will have less to retire on,” Andrew Little says.

ENDS

KiwiSaver_Cuts.xlsx

66 comments on “National costs you $100,000 from your retirement fund”

  1. jcuknz 1

    In addition there are holes in the scheme which enable you to use part to fund your home to reduce it further. Quite apart from savings are held in expensive private schemes, with not guarantees, which further reduce matters. Even 4% was ridiculously low and to be meaningful should have been almost twice that as I ended up paying with NatProv.
    I am glad it was not possible for me to dip into my fund. But of course I worked in happier days did I but know it.

  2. dv 2

    And don’t forget the OBR where a collapsing bank can take 10% of you saving to prop them up. (I know not Kiwisaver)

  3. Greg 3


    There is a little-known clause in the Employment Relations Act that allows for an employee’s salary to represent ‘total remuneration’ for the role they perform.

    “Should that employee decide to join KiwiSaver, the cost of the employer’s contribution will come directly from the employee’s pay.

    “If an employer wishes to adopt the ‘total remuneration’ approach, there is still the requirement to negotiate in good faith with the employee.
    =How many employee’s have that option.

    The Individual Employment Agreement must include a clause detailing the ‘total remuneration’ which accounts for the amount of the employer’s contribution (if any)’

    =Who has this in there employment agreement?

    =Still think its a wonderful deal.
    =loss of compounding wage rises, + long term effect?

    http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11341802

    http://www.dummies.com/how-to/content/how-investments-lose-value-over-time.html

    • Infused 3.1

      Thats hardly little know

    • The New Student 3.2

      Yes, people are more aware of total rem arrangements nowadays but doesn’t hurt to keep making noise about it. I’ve been on total rems before. It’s a bit tough seeing the whole lot come out of your pay! But yeah it does require the employee to be both aware and confident enough to negotiate the contribution component, which many certainly are not. which this government seems to encourage

  4. Draco T Bastard 4

    Kiwisaver is just another capitalist Ponzi scheme. It adds to the inequality and environmental destruction that is inherent in capitalism and, of course, it will eventually collapse the same way that capitalism is presently collapsing.

  5. save nz 5

    Unbelievable!! National are so greedy and sneaky!! Plenty of money for their corporate cronies through I see.

    And that is why I never went into Kiwisaver and why Kiwis don’t save for their retirement.

    What’s the point if in the course of your lifetime some greedy politician comes and steals money you should have received or makes changes every year.

    Who can trust them. Even if you trust one party, the next one comes along to steal it.

    They should have a guarantee on it. No changes.

    Apparently we can lock in TPPA against workers but can’t lock in benefits for workers.

    Disgusting.

    Great work by Labour and Andrew Little to let us know about this dodgy rip off by the National party.

    And people are still waiting for that holiday pay too…

    • mosa 5.1

      I joined kiwisaver just before the National party won in 2008 knowing they would despite John Keys soothing words lay their thieving hands on the scheme and make it as they always do to the disadvantage of the hard working kiwis who had in good faith and enticed by the $1000 kickstart and employer contribution to match their own.
      Before they harmed it and made it unequitable it was a well put together scheme to encourage kiwis who do not save a cent to put aside a supplement to a minimum pension when they finish working.
      If they had the long term of the country as their priority not just 9-12 years and enhanced the scheme incl the emloyer contribution rate , tax credits ,and join up incentive in other words improved it as an investment instead of a cash cow to tinker with it would have demonstrated some commitment to long term savings which we dont have a good track record of and increased confidence that it would remain in its current form and not interfered with and not disadvantage the working kiwis that already get nailed on everything else by being in the fund.
      That would have demonstrated mature leadership but we dont do maturity well in New Zeeluund.
      $100,000 less to live on is deliberate fraud against working kiwis and Little should keep saying it LOUDLY at every given opportunity !

  6. Eralc 6

    So what will Labour do, put it all back to how it was? Semantics, I know, but the second and third bullet points seem to be one in the same – I stand to be corrected if that’s not right.

    • mosa 6.1

      The point is they should NOT have too put it back if as Key promised they would not alter it !!!
      It should not have been taken in the first place !!!
      Why do idiots keep voting for this party knowing its track record when it comes to governing this country its never good for hard working kiwis.
      Compasionate conservatisim _ brighter future my arse !! another John Key Myth

  7. fisiani 7

    Labour just whinge and whinge and complain about National not spending enough. Money does not grow on trees or from a magic hole in the wall machine. Note that Labour are not planning to give you $100,000 just moan about it. How can you lose something that you never had?

    • Stuart Munro 7.1

      Money certainly doesn’t grow on trees when one’s fiscally irresponsible tax cut has endebted the country to the tune of $120 billion, and is headed for $150 billion if no public spirited citizen deposes this utterly useless corrupt government.

      • Dv 7.1.1

        And don’t forget the 1.6 billion bailout to SCF.

      • ropata 7.1.2

        there’s plenty of cash for convention centres, motorways, and tax breaks for corporations. lots of fancy new skyscrapers and sports stadiums are in the works. it’s really sweet that there’s no capital gains tax and house prices are just shooting up forever.

        oh sorry no cash for social housing or hungry school kids.

        • Stuart Munro 7.1.2.1

          You’re right of course – I’m much too generous to these thieving scoundrels.

    • maninthemiddle 7.2

      Exactly! And yet other posters here have accepted lying Little’s so called ‘analysis’ hook line and sinker.

    • Colonial Viper 7.3

      How can you lose something that you never had?

      We did have it. Labour had set up a good deal. Then National pulled out of it.

      • maninthemiddle 7.3.1

        When? In 1975? If so, I never had, so I never lost it. Besides, i’d rather manage my own retirement savings thanks.

    • Colonial Viper 7.4

      Money is created faster than a tree creates leaves. That’s because in the modern day, money is created out of thin air by keyboard strokes.

      In the last thirty years the NZ Government has allowed the new dollars in circulation to quintiple in just the last couple of decades. Over $100B in brand new dollars.

      Materialised out of thin air.

    • Pat 7.5

      there appears to be no lack of money trees for tax cuts however…

    • Sabine 7.6

      26 mil flag debacle

      • gsays 7.6.1

        and petty cash is full with the $ that used to go to lifeline.

      • jcuknz 7.6.2

        Since most of the 26 million went to the Post Office it was a donation to keep the loss of that organisation down … tricky that!

    • ropata 7.7

      And yet the house prices in Auckland have doubled in the last 6 years. Money DOES fucking grow out of thin air. It’s wealth that hasn’t been growing as the top 5% like Key have stolen ever more off the lower IQ morons like you

    • Fisiani, looks like you have lost a brain, or maybe you never had one in the first place,

  8. dave 8

    all i can think about is the half a trillion dollars debt when houseing bubble pops
    the debtors should pay not savers

  9. Incognito 9

    Something badly wrong here? The difference between $6700 and $3500 is $3200 and not $2,200 as stated in this Post and the original Media Statement!?

  10. Wayne 10

    Lets assume the calculations are correct. It is obviously true that if the taxpayer subsidy for each Kiwisaver account is reduced, the final amount saved in each account will be less.

    I recall the reason why the changes were made, which was primarily because the uptake rate was much higher then anticipated by Treasury in part due to the size of the taxpayer subsidy. It also meant the cost to the govt finances was much higher then Treasury estimated, and at a time when we were in the middle of the GFC. This meant money being extracted from the economy and put into long term savings at the very time when current consumption was the need, or in other words the requirement was economic stimulus.

    So Labour has now done the calculations of the impact of the changes for an account that lasts 49 years, fair enough. But it does raise the obvious question, will Labour restore all the subsidies for KiwiSaver, at a cost to govt expenditure of probably around $500 million, maybe more?

    • ropata 10.1

      Is that what you tell yourself when cheering on the theft of billions from hard working kiwis?

      FFS you RWNJs are short sighted idiots and have fucked over NZ time and time again

      http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10465138

      • Wayne 10.1.1

        Well actually it was not hardworking kiwis money that was taken, it was a reduction of the taxpayer subsidy that the govt (other taxpayers) gave to each KiwiSaver. Obviously people keep what they had already got, it was future taxpayer subsidies that were reduced.
        As I say the real question is whether Labour will reinstate the level of taxpayer subsidy that prevailed in 2008.

        • ropata 10.1.1.1

          1. government finance is not a zero sum game. it is their own policy of tax cuts to the wealthy that have screwed the balance sheet & provided a pathetic excuse for artificial cuts to social spending
          2. the real question is not what you say it is. labour is not in government
          3. national must answer for their regressive policies that have worsened inequality in New Zealand and thrown thousands into poverty. that is the “real question” IM(NS)HO

        • RedBaronCV 10.1.1.2

          Much as us kiwi’s (other taxpayers) decided that the best way to deal with the GFC was to give major tax cuts to high end earners, fund Saudi sheep farms, bail out SC Finance, Tiwai point, flag referendums , build useless roads etc etc. All very low quality government spending compared to Kiwisaver.

          But hey you keep mentioning how well you are doing so you and other wealthy high end earners will be happy to pay a couple of thumping levies to get that external debt under control and pop a lump sum in those kiwisaver accounts!

    • ropata 10.2

      It’s funny how all the Nat Party policies have a short term benefit to the wealthiest 1% and a long term cost to the long suffering NZ taxpayer.

    • save nz 10.3

      What is the cost of Kiwi’s not saving, for treasury?

      Yep, always Labour’s fault, they get more people than expected saving for their retirement, but under National – that’s bad!

      National seem so keen on subsidising businesses in corporate welfare but that’s good!

      Bit of a double standard there.

      Anyway I knew National would get in and F*&k it up, so I never joined.

      BTW our mostly Aussie banks don’t have to guarantee bank deposits like practically every other OECD country… wonder why Kiwis don’t save – look at the reasons!

    • DH 10.4

      “This meant money being extracted from the economy and put into long term savings at the very time when current consumption was the need, or in other words the requirement was economic stimulus.”

      That argument might have some merit if the Govt hadn’t also walloped up ACC levies around the same time Wayne. You’re just making shite up there IMO.

  11. Stuart Munro 11

    So in essence what you’re saying Wayne is that the Gnat’s economic management is so inept they cannot meet their obligations. Rockstars indeed!

  12. b waghorn 12

    They should of kept the kick start , dumped tax credits , and not taxed the earnings , also cracking down on the amount of fees would be good.

  13. slumbergod 13

    hahaha “retirement”??? What’s that? There isn’t going to be any retirement for the people at the bottom of society, just like there isn’t going to be health care, dental care, or welfare.

  14. stunned mullet 14

    Give me some free money !

    • Paul 14.1

      Someone who defends a government that does not house its citizens.
      Shame on you.

      • stunned mullet 14.1.1

        Big ups Paul – I love your morning moan.

        perhaps you could spice it up like this piece I was sent from the UK…

        “…..While we’re on the subject of scum. Blair has once again stuck his head above the parapet. As we know, we need to negotiate our new relationship with the Fourth Reich over in Brussels. As we also know, this will be pretty complex. So, up pops Tony Blair, like the eternal foul stench, once again pretending to be our saviour and offering his services as a negotiator.
        Apart from the fact Blair is a filthy, murdering, money whore, lying, arrogant, ignorant, dishonourable, dishonest, conniving, warmongering, bloodthirsty traitor. He never does ANYTHING unless there is something in it for Tony Blair. His chances of a cushy job in Brussels have been shot to shit, so I can only imagine that Blair considers this an opportunity to once again raise his profile and be seen as some kind of hero. He seems to need the adoration of the public. The big problem he faces, is that everyone on Planet Earth knows that he’s a massive cunt.

        Still, he can’t resist the opportunity of taking part in a high profile negotiation. Whoever turns out to be our next Prime Minister, their first job should be telling Blair to fuck off, and shove a live hand grenade up his arrogant arse. Let’s not forget, it was Blair who gave up part of our rebate on the money that the EU steals from us each year.

        Though not for much longer…”

        • save nz 14.1.1.1

          +1 Stunned Mullet, while I wouldn’t describe Tony Blair in quite the same terms, I think you are totally on the right track about him in general.

          The big joke was when he volunteered to help the Palestine/Israel peace talks after invading Iraq. What a joke, no wonder the peace talks stalled with him on board – political sabotage!

          • stunned mullet 14.1.1.1.1

            Not my work save nz a friend from up north in the UK sent it across.

            He’s also sent see great stuff on Jeremy Corbyn if you want me to post the random thoughts of a yorkshireman.

    • Pat 14.2

      “Give me some free money !”

      Isn’t that what we do for all those negatively geared rentiers (to name just one group)?

    • dv 14.3

      Ha SM is a bank – heard of the OBR?

  15. DH 15

    I’m not sure you want to link to their workings, their error is rather glaring.

    God these Labour people are amateurs, they can’t even get their numbers right on simple stuff like this.

    • Pat 15.1

      what error would that be?

      • DH 15.1.1

        Employees don’t lose their own contribution Pat. Cutting the employers maximum from 4% to 3% doesn’t cut the employees contribution to 3%.

        • Pat 15.1.1.1

          and you suggest the calculation assumes an employee contribution reduction to 3%?

          • DH 15.1.1.1.1

            That it does Pat, you could try looking at it yourself.

            • Pat 15.1.1.1.1.1

              that it does…not doing themselves any favours presenting it thus even though its reasonable to assume a matching of employee contribution to employers contribution for maximum benefit.

              • DH

                Mistakes like that sabotages their own argument. The one lesson they should have learnt by now is to double-check their figures before quoting them.

                The Labour caucus really do appear to have a problem with their maths, they just don’t seem to have (m)any MPs who are good with numbers.

                • Pat

                  suspect it wasn’t a math problem….rather a political nous problem…..they were trying to present the worst possible case, foolish given it was bound to be noted and discredits them, whereas they could have presented a slightly less bad case and added a rider saying”and it could potentially be worse”.

                  As you note…they should have learned by now.

                  • DH

                    I have to admit I have no idea what they were thinking at all. Their argument is dumb, it leaves them wide open to ridicule and rebuttals.

                    They neglected to add in the compounding interest which would genuinely take the losses over $100k.

                    The lost tax credit of $521.43 alone would compound to over $48k at a conservative annual return of 3% (after tax).

                    • The argument and supporting example is overly simplistic and rather unrealistic, but not dumb. It talks about contributions. Not returns. Not account balance. I’d say compounding interest has no bearing on the contributions required by legislation.

                      Thus, the ~$100K difference in contributions (on a constant salary of $57.7K for 45 years straight) when comparing Labour’s scheme with that of National checks out.

                      While I thought it was a bit silly overkill having two points that refer to the exact same thing, one must remember that many members don’t contribute enough to max out the MTC in a year. So now they only get 50c in the dollars they do contribute (up to $521) as opposed to dollar for dollar (up to $1042).

                      The compulsory employer contribution rate (CEC) well I believe Labour planned for a rate of 4% from 2011 onwards. What we got was 2% then upped to 3% from 2013 onwards. http://www.treasury.govt.nz/budget/2007/kiwisaver/pdfs/ks-employer.pdf
                      So I guess saying “Reduced employee/employer contributions from 4 per cent to 3 per cent” has some persuasive merit.

                      Reducing the employee contribution to minimum of 3% well that’s hardly persuasive as one can elect to contribute 4% if they so wish. But again, I think Labour intended the minimum to be 4% from 2011 onwards, so that’s why it was used for calculating the Labour example in the spreadsheet.

                      ESCT erodes the employer contribution, pretty plain as day. It was probably necessary for reasons.

                      I believe National removed the $40 fee subsidy and also removed the $1040 (ish) employer subsidy/tax credit.

                      So contributions-wise, KiwiSavers ARE worse off under the tweaks and changes introduced by National government, as we all know. Mainly due to reduction in MTC, removal of kickstart and application of ESCT. The simple example given is a pretty sound comparison between what is, and what was/might have been. Yes the power of compound interest is the whole point of a long-term investment like KS, but it has little to do with the contributions required by legislation.

                    • DH

                      “Thus, the ~$100K difference in contributions (on a constant salary of $57.7K for 45 years straight) when comparing Labour’s scheme with that of National checks out. ”

                      You’ve lost me there. Are you saying you can’t add & subtract or you haven’t looked at their figures?

    • save nz 15.2

      @DH bit like English not being able to work out the cost of parental leave bill. Never mind, nothing in it for English, why would he bother?

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