The Kiwisaver “employer contribution” scam

Written By: - Date published: 7:28 am, May 12th, 2011 - 23 comments
Categories: class war - Tags:

The media is reporting that the government’s cuts to Kiwisaver will be offset by an increase in the minimum contributions made by workers and employers.

Not ideal I hear you say but at least it’s evenly delivered – with both workers and employers being made to pay more.

Well not quite.

The thing is there was a loophole in the original Kiwisaver scheme that allowed employers to deduct the employer share of Kiwisaver from the worker’s pay-packet. Which means any employer that didn’t want to pay would simply push the cost onto the worker involved.

That was closed by Labour in 2008 (and they got heavily attacked for it by the Employers and Manufacturer Association). But here’s the thing. One of the first things National did when they got into power was reopen that loophole. Consequently many employers went right back to taking their contribution out of their workers’ pay.

Meaning many workers are effectively paying 4% into Kiwisaver while the boss pays nothing and that means the only incentive for being in Kiwisaver for these workers is the government contribution. Which is now being taken away.

Add to that the fact that, because of the loophole, a 1% increase in both worker and so called “employer contributions” will mean many Kiwi workers will end up with 6% of their wages being deducted into Kiwisaver instead of 4%. On top of losing the government contribution.

While most employers will pay nothing more. No wonder Business New Zealand and the Employer and Manufacturers Association are welcoming the move.

23 comments on “The Kiwisaver “employer contribution” scam ”

  1. MrSmith 1

    National’s plan from the start, don’t scare the horses, just give them a little Less food every day, that way they won’t notice until it’s to late.
     
    And wait for it, they will then claim they got rid of the obesity epidemic as well.

    • Sam 1.1

      Phil Goff, although decrying the changes to kiwisaver, is also reported to have said that Labour will not reverse them.
      Shades of “Axe the tax”?

      • Lanthanide 1.1.1

        No, he hasn’t said that “Labour will not reverse them”, he’s said that Labour would be reviewing Kiwisaver as well and potentially make changes to it. David Cunliffe indicated that changes would make it more attractive to save – not less. But that doesn’t mean they wouldn’t also reduce or scrap the government tax credit.

  2. Lanthanide 2

    I’m still expecting National to come out with something ‘unexpected’ with the kiwisaver changes. One thing that is quite possible is they nix the government ‘tax credits’ entirely, and replace it with tax-free employee contributions.
     
    You would still pay 2% or whatever of your income into kiwisaver, but it would be tax free. Essentially this means instead of paying tax on your full amount of income and losing 2% of take-home pay, the 2% would come off the top and you’d only pay tax on 98% of your income. This would work out to being an in-the-pocket tax-cut to anyone currently contributing to kiwisaver. It would also benefit the wealthy the most. At 4% contribution level, anyone earning over $78k would get a bigger benefit than the current $1040 tax credit. It’s a little tricky to work it out for incomes under $70k due to the tax rate changes, but it looks like you’d need to earn at least $50k year to get a greater benefit even contributing at the 8% rate. Of course they could always cap the maximum deduction at a certain figure.

    • It would also further reduce the tax take thus offsetting part of the ‘saving’ from eliminating the tax credit. That would be another step in the structural changes they want to make to the economy overall – under the guise of a bit of minor, crisis driven, ‘tinkering’ with something they are supposedly leaving substantially ‘in tact’ (or that’s the line that could be run).

      That is, the wealthier would pay less tax and the rest would have to pay more for the things required to function in this society. I suppose the idea is that this would create ‘incentives’ for those individuals not ‘performing’ in the economy (i.e., those individuals who only work long hours at poorly paid jobs in bleak and heartless physical environments that incrementally undermine their health and probably therefore won’t need much in the way of ‘savings’ for retirement as they’ll die earlier.).

      Reminds me of an old New Yorker cartoon. Two old guys are sitting in leather chairs in a “gentleman’s club”. One is reading the paper and says to the other: “I see the rich are getting richer; but, then again, the poor are getting poorer so it all balances out in the end.”

    • PeteG 2.2

      One thing that is quite possible is they nix the government ‘tax credits’ entirely, and replace it with tax-free employee contributions.

      Interesting idea and it does simplify things, taking less rather than taking and giving back at the end of the year. You would gain slightly due to getting more into your KiwiSaver account sooner rather than once a year.

      Or – they could be fairer to low earners who can’t afford to be in KiwiSaver – and introduce a no tax scale or lower the rate on the lowest scale to compensate for an equivalent of maybe half of the MTC – but those not in KiwiSaver get some benefit which they miss out on now.

      Getting TIAT is pointless now until we know what the whole KiwiSaver/WFF/tax package is in the budget – they must be laughing at all the handwringing.

      • Lanthanide 2.2.1

        Apparently you don’t understand how kiwisaver works.
         
        Say you earn $100,000 a year, and are on the 4% contribution rate. $4,000 will be put into kiwisaver every year, directly from your salary. With current tax rates, your tax liability (including ACC) is $26,164.37, so your after-tax salary is $73,835.63. Because kiwisaver employee contributions are currently taxed, that $4,000 comes off the final figure, giving you $69,835.63 take-home pay, or $5819.64 per month.
         
        If you implemented my suggestion of tax-free kiwisaver contributions, the $4,000 comes off at the very start, so your total taxable income is instead $96,000. Your monthly after-tax & after-kiwi saver income is then $5,929.64, or an increase of $110 extra take-home per month – which is 33% of $4,000 / 12.
         
        In both cases, you are contributing to $4,000 to kiwisaver per year, and the timing of the payments has not changed at all. What has changed is that instead of getting $1042.86 in tax credits put into your kiwisaver account at the end of the kiwisaver year (30th June), you get tax cuts in your pocket monthly – $110/month or $1320 total in my example. This is more than the current tax credits are worth, so as I’ve illustrated, this would be a tax cut for the rich – and therefore exactly the sort of thing National are likely to do.

        • Herodotus 2.2.1.1

          My metals man- to do as you say for me you have to make it compo, otherwise yet again (and I keep on saying it) those who dont cont then subsidies those who do i.e. the poor subsidies the rich. But Ihear you say thatthe poor canot afford to contribute (Which is very fair reply) then review and increase those on lower wages and up the benefit in theory by 4% and contribute that to the fund. Otherwise I am in support. But when most are struggling to cope day to day how can they contemplate retirement.
          Also as under current law you are unable to “gross up” your pay packet to compensate for opting out. So those aged over 65 and still actively working are being paid as a grossed up salary an inferrior amount than those under 65.

    • Peter 2.3

      I’m guessing that they will announce positive savings moves that reduce the tax you pay on money saved with the trading banks. This will be in response to banks saying it is not fair that Kiwisaver is far more attractive to the average punter than tradition saving with a trading bank.

      So National will claim that they are giving people an incentive to save even though it will far less attractive than Kiwisaver.

      • Lanthanide 2.3.1

        As outlined in the post the other day, I think that’s a bit too blatant of a tax-cut for the rich.

  3. Pascal's bookie 3

    Seeing it’s so stupid to borrow money to deposit into citizen’s savings accounts, I’m guessing there won’t be any national party mps taking advantage of the deal where for every dollar they put into their super scheme, the taxpayer puts in $2.50.

    As a matter of principle I’m guessing that they are all just using plain old vanilla kiwisaver like us plebs get right? Surely they aren’t getting the taxpayer to borrow money to put into their accounts, right?

  4. Kiwisaver restructuring looks like a wage freeze in disguise.

  5. Kaplan 5

    John key has hated this scheme since day one.
    Don’t let them cut Kiwisaver

  6. randal 6

    everything in NZ is done on the cheap.
    I guess we are just cheap people.

    • MrSmith 6.1

      Cheap&Nasty

    • Draco T Bastard 6.2

      Yep. Very cheap and we don’t like paying the full cost for anything. And that’s the objective cost which cannot be cut not the subjective price which can. Builders in Auckland ATM can work 40+ hours per week and not have enough to live on. Amazingly enough, no one in Chch is making any better offers. In fact, Fletchers capped the hourly rate.

  7. Sam 7

    Im gonna be the devils advocate here and ask why should the government be getting involved in peoples’ savings anyway?

    • Lanthanide 7.1

      Because the people have clearly shown they’re incapable of saving their money responsibly. Not just people in NZ either, but most (all?) developed countries have some sort of public pension savings scheme, many of them compulsory (like Australia).

      The national debt of New Zealand is at somewhat dangerously high level also, but 90% of that is a private debt problem. So it makes sense for the government to target private savings in order to improve the country’s balance sheet. The problem is doing this without also making the public debt worse.

    • Tanz 7.2

      Because generally, people in NZ have a poor savings record (and I’m one of the not-outstanding savers), and a worse one for retirement. Also, there are few spare dollars to be put aside and not touched. That’s one of the great things about Kiwisaver – it cannot be accessed, except for a first home, or for serious illness etc. It is locked away until the person reaches the age of sixty five. That money will be invested, reinvested and will grow fast, compound interest, high returns. Hope so, anyway, that’s my understanding of it.

  8. joe90 8

    How long before something like this is suggested.

    The various tax reduction and additional expenditure measures which I am announcing today will be funded by way of a temporary levy on funded pension schemes and personal pension plans. I propose that the levy will apply at a rate of 0.6% to the capital value of assets under management in pension funds established in the State.

  9. Tom Gould 9

    And where are the lazy, brain dead, indolent, craven, media on this Tory scam? Asleep at the wheel as usual. Or more likely having a drink and a laugh with their big buddy John?

Recent Comments

Recent Posts

  • Government backs police to crackdown on gangs
    The coalition Government is restoring law and order by providing police new tools to crack down on criminal gangs, says Justice Minister Paul Goldsmith and Police Minister Mark Mitchell.  “Over the last five years gangs have recruited more than 3000 members, a 51 per cent increase. At the same time, ...
    BeehiveBy beehive.govt.nz
    14 hours ago
  • Northland’s new Kāeo Bridge officially open
    Transport Minister Simeon Brown has welcomed the official opening of the new State Highway 10 (SH10) Kāeo Bridge, which will improve safety and traffic flow for people heading to and from the Far North. “This is an important piece of infrastructure for the Northland region that will help members of ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Dry weather triggers extra support for farmers and growers across the top of the South Island
    The coalition Government is providing support for farmers and growers as dry conditions worsen across the top of the South Island. “Conditions on the ground across the Marlborough, Tasman, and Nelson districts are now extremely dry and likely to get worse in the coming months,” Agriculture Minister Todd McClay said. ...
    BeehiveBy beehive.govt.nz
    2 days ago
  • Trade Minister heads to Abu Dhabi for key WTO negotiations
    Trade Minister Todd McClay travels to Abu Dhabi in the United Arab Emirates for the 13th Ministerial Conference of the World Trade Organisation (WTO) today, to take up his role as Vice Chair of the negotiations. The Ministerial Conference is the highest decision-making body within the WTO and meets every ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Appointment round for King’s Counsel announced
    Attorney-General Judith Collins today announced an appointment round for King’s Counsel will take place in 2024. Appointments of King’s Counsel are made by the Governor-General on the recommendation of the Attorney-General and with the concurrence of the Chief Justice. The Governor-General retains the discretion to appoint King’s Counsel in recognition ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Retiring Chief of Navy thanked for his service
    Defence Minister Judith Collins has thanked the Chief of Navy, Rear Admiral David Proctor, for his service as he retires from the Royal New Zealand Navy after 37 years. Rear Admiral Proctor will retire on 16 May to take up an employment opportunity in Australia.  “I would like to thank ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Indonesian Vice President to visit New Zealand
    Indonesia’s Vice President Ma’ruf Amin will visit New Zealand next week, the first here by an Indonesian leader since 2018, Deputy Prime Minister Winston Peters has announced. “New Zealand and Indonesia have a strong partnership,” Mr Peters says.  “The Vice President’s visit is an opportunity to discuss how we can strengthen ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Government boost to fight against caulerpa
    The battle to contain the fast-spreading exotic caulerpa seaweed has today received a $5 million boost to accelerate the development of removal techniques, says Biosecurity Minister Andrew Hoggard.  “The time is now to really lean in and build on the work of Biosecurity New Zealand, mana whenua, communities and local ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Minister attending Australian data, digital meeting
    Minister for Digitising Government Judith Collins is in Sydney to attend the first Data and Digital Ministers’ Meeting of 2024.  “This is a great opportunity to connect with our Australian counterparts and identify how we can work together on digital transformation,” Ms Collins says.   “Both our nations are looking into ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Appointments to Antarctica New Zealand Board
    Foreign Minister Winston Peters has appointed Leon Grice and Heather Simpson to serve on the Antarctica New Zealand board.  “Since taking office, the Coalition Government has become concerned about the direction of the Scott Base Redevelopment Project,” Mr Peters says.  “It is vital that Antarctica New Zealand has the right ...
    BeehiveBy beehive.govt.nz
    3 days ago
  • Strengthening the Single Economic Market
    Finance Minister Nicola Willis has met with Australian Treasurer Jim Chalmers to discuss the opportunities to lower business costs and increase the ease with which businesses and people can operate across the Tasman.     “I have met with Treasurer Chalmers and shared our new Government’s ambitious economic goals, our plans ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Government to address business payment practices
    The Government will repeal the Business Payment Practices Act 2023, Small Business and Manufacturing Minister Andrew Bayly announced today. “There is a major problem with large market players imposing long payment terms and routinely paying invoices late. “However, the Business Payment Practices Act is not an effective solution and would ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Greater focus on work will reduce child poverty
    Worsening child poverty rates support the Coalition Government’s focus on reducing the cost of living and getting people into work, Child Poverty Reduction Minister Louise Upston says. Figures released by Stats NZ today show child poverty rates have increased, with the rising cost of living, driven by inflation, making it ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • NZ announces new support for Ukraine
    Foreign Minister Winston Peters and Defence Minister Judith Collins have marked two years since Russia’s invasion of Ukraine by announcing further support and sanctions, and extending our military assistance. “Russia launched its illegal, full-scale invasion of Ukraine, in blatant violation of international law, including the UN Charter,” Mr Peters says. ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • Finance Minister to meet Australian Treasurer
    Finance Minister Nicola Willis will travel to Australia today to meet her Australian counterpart, Treasurer Jim Chalmers.    “New Zealand and Australia have an incredibly strong trade and investment relationship. The Closer Economic Relations and Single Economic Market are powerful engines for growth on both sides of the Tasman.     “I will ...
    BeehiveBy beehive.govt.nz
    4 days ago
  • PM shocked and saddened at death of Efeso Collins
    “I am truly shocked and saddened at the news of Efeso Collins’ sudden death,” Prime Minister Christopher Luxon says. “Efeso was a good man, always friendly and kind, and a true champion and advocate for his Samoan and South Auckland communities. “Our thoughts and deepest sympathies go to his family, ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Greater support for social workers
    The Coalition Government is enhancing the professionalism of the social work sector and supporting the vulnerable people who rely on them, Social Development and Employment Minister Louise Upston says.  The Social Workers Registration Legislation Amendment Bill passed its third reading in Parliament today. It amends the Social Workers Registration Legislation ...
    BeehiveBy beehive.govt.nz
    5 days ago
  • Government delivers greater freedom and choice for sick New Zealanders
    The coalition government is delivering on its commitment to making principled decisions by getting rid of red tape that doesn’t make sense and allowing sick New Zealanders greater freedom and choice to purchase effective cold and flu medicines. A bill amending the Misuse of Drugs Act 1975 is being introduced, and changes to the Medicines ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • Government begins reset of welfare system
    The Coalition Government is taking early action to curb the surge in welfare dependency that occurred under the previous government by setting out its expectations around employment and the use of benefit sanctions, Social Development and Employment Minister Louise Upston says. In 2017, 60,588 sanctions were applied to beneficiaries who ...
    BeehiveBy beehive.govt.nz
    6 days ago
  • State of the Nation
    Ka nui te mihi kia koutou. Kia ora, good morning, talofa, malo e lelei, bula vinaka, da jia hao, namaste, sat sri akal, assalamu alaikum. Thank you for coming to my first State of the Nation as Prime Minister. Thank you for coming to a speech where I don’t just ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • West Coast tourism attractions officially open
    Regional Development Minister Shane Jones will attend the official opening of two highly anticipated tourism projects on the West Coast today – Pike29 Memorial Track, dedicated to the memory of the Pike River miners, and Pounamu Pathway. “The Pike29 Memorial Track is a way to remember and honour the men ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Independent ferry service advisory group in place
    Appointments to the Ministerial Advisory Group tasked with providing independent advice and assurance on the future of KiwiRail’s inter-island ferry service have been made, State Owned Enterprises Minister Paul Goldsmith says. “It’s important for New Zealand that KiwiRail is focused on ensuring safe, resilient, and reliable ferry services over the ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Joint statement from the Prime Ministers of Australia, Canada, and New Zealand
    The Prime Ministers of Australia, Canada and New Zealand today issued the following statement on reports of Israel’s planned military operation in Rafah. We are gravely concerned by indications that Israel is planning a ground offensive into Rafah.   A military operation into Rafah would be catastrophic. About 1.5 million Palestinians ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Govt will deliver on expanded breast screening
    The coalition Government has made the first steps in delivering on its promise to  extend free breast screening to women aged 70-74, Health Minister Shane Reti says. “As part of the 100 day plan, the Government has now met with officials and discussed what is needed in order for the ...
    BeehiveBy beehive.govt.nz
    1 week ago
  • Government announces woolshed roadshows in support of sheep farmers
    The Government celebrates National Lamb Day (15 February 24) and congratulates sheep farmers on the high-quality products they continue to produce. Agriculture Minister McClay hosted bipartisan celebrations of National Lamb Day with industry representatives at Parliament this week to mark the anniversary of the first frozen lamb exports that left ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Speech: Address to the NZ Economics Forum
    It’s great to be back at the New Zealand Economics Forum. I would like to acknowledge everyone here today for your expertise and contribution, especially the Pro Vice-Chancellor, Head of the Waikato Management School, economists, students and experts alike. A year has passed since I was last before you, and ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Government tackling high construction costs
    The Government is focused on reducing sky-high construction costs to make it more affordable to build a home, Building and Construction Minister Chris Penk says.  Stats NZ data shows the cost of building a house has increased by 41 per cent since 2019, making housing even more unaffordable for Kiwi ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Labour’s Three Waters legislation repealed
    The Coalition Government’s legislative plan to address longstanding issues with local water infrastructure and service delivery took an important step today, with the repeal of Labour’s divisive and unpopular Three Waters legislation, Local Government Minister Simeon Brown says. “Repealing this legislation is a necessary first step in implementing our Local ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Cost of living support for beneficiary households
    The Coalition Government is delivering on its commitment to ease the cost-of-living by increasing main benefit rates in line with inflation and ensuring the Minimum Family Tax Credit threshold remains aligned with this change, Social Development and Employment Minister Louise Upston says. The Social Security (Benefits Adjustment) and Income Tax ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Government announces agriculture delegations to better support Primary sector
    The coalition Government has announced ministerial delegations to support key areas across the Primary sector to deliver for New Zealand’s food and fibre sector, Agriculture Minister Todd McClay announced today. “I will be supported in my roles as Minister of Agriculture, Trade, Forestry and Hunting and Fishing, by three Associate ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Waikato MoU reinforces Govt’s commitment to increase NZ doctors
    The Government has taken an important step forward in addressing a critical shortage of New Zealand-trained doctors, with today’s signing of a Memorandum of Understanding for a third medical school, Minister of Health Dr Shane Reti has announced.  “Today’s signing by the Ministry of Health and the University of Waikato ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Speech – Lunar New Year 2024
    Annyeonghaseyo, greetings and welcome all. It is my pleasure as the Minister for Ethnic Communities to welcome you to the first Lunar New Year Event in Parliament. Thank you to our emcees for greeting us in the different languages that represent the many cultures that celebrate the Lunar New Year. ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • More funding to Hawke’s Bay and Tairāwhiti
    Urgent work to clean-up cyclone-affected regions will continue, thanks to a $63 million boost from the Government for sediment and debris removal in Hawke’s Bay and Tairāwhiti.                                                                                                   The funding will help local councils continue urgent work removing and disposing of sediment and debris left from Cyclone Gabrielle.   “This additional ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Budget will be delivered on 30 May
    Plans to deliver tax relief to hard-working New Zealanders, rebuild business confidence and restore the Crown’s finances to order will be unveiled on 30 May, Finance Minister Nicola Willis says. The plans will be announced in the Budget which is currently being developed by Ministers.  “The last government’s mismanagement of ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Government advances Local Water Done Well
    The Coalition Government is continuing work to restore council ownership and control of water assets by repealing Three Waters and appointing a Technical Advisory Group to provide expert advice on the implementation of Local Water Done Well, Local Government Minister Simeon Brown says. “The Government will pass a bill to ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Minister congratulates NZQA Top Scholars
    Education Minister Erica Stanford congratulates the New Zealand Scholarship recipients from 2023 announced today.  “Receiving a New Zealand Scholarship is a fantastic achievement and is a testament to the hard work and dedication the recipients have put in throughout the year,” says Ms Stanford.  “New Zealand Scholarship tests not only ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • New diplomatic appointments
    Foreign Minister Winston Peters has today announced five new diplomatic appointments.  "Strong and effective diplomacy to protect and advance our interests in the world is needed now more than ever," Mr Peters says.  “We are delighted to appoint senior diplomats from the Ministry of Foreign Affairs and Trade to these ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Speech to the Committee for Auckland
    It is great to be here today at this event as Minister for Auckland and Minister ofTransport. Let me start by acknowledging each one of you and thanking the Committee forAuckland for hosting this event and inviting me to speak here today. The Committee for Auckland has been a symbol ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Getting Transport Back on Track in Auckland
    Transport Minister Simeon Brown has today confirmed his high-level transport priorities for Auckland, in the lead up to releasing the draft Government Policy Statement on Land Transport. “Our economic growth and productivity are underpinned by a transport network that enables people and freight to move around safely and efficiently. At ...
    BeehiveBy beehive.govt.nz
    2 weeks ago
  • Government to axe Auckland Regional Fuel Tax
    Transport Minister Simeon Brown has confirmed that the Auckland Regional Fuel Tax will end on 30 June 2024. “Today, I can confirm that the Government has agreed to remove the Auckland Regional Fuel Tax in line with our coalition commitments, and legislation will be introduced to parliament to repeal the ...
    BeehiveBy beehive.govt.nz
    2 weeks ago

Page generated in The Standard by Wordpress at 2024-02-25T13:13:56+00:00