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.