Unions offer better option for Kiwisaver changes

Written By: - Date published: 10:17 am, November 14th, 2008 - 26 comments
Categories: kiwisaver, national/act government, workers' rights - Tags:

The unions have proposed an alternative to National’s plan to slash Kiwisaver in half. If Kiwisaver has to be cut, and with National/Act in power it will happen one way or the other, then I prefer the union plan.

As it stands now, you contribute 4% of your gross earnings, your employer matches that 4% (once the scheme is fully implemented in 2011), and the Government matches you dollar for dollar up to $20 a week (ie everyone earning over $26,000 a year gets $20 a week). The Government also refunds your employer up to $20 a week on their contribution to your Kiwisaver and anything above that is tax deductible for your employer (so each dollar over $20 a week costs your employer 70 cents and the Government 30 cents).

National pledged to change this ‘4+4′ scheme to a 2+2’ scheme. You contribute 2% and your employer matches that 2%. Obviously, you only get half the employer contributions but you also get less from the government if your income is below $52,000 (the point where weekly contributions hit $20 at 2% of gross income). Under National’s plan, you lose contributions worth 4% of your gross income if your income is below $26,000, you lose 2-4% if your income is $26K-$52K and 2% above that. From lower matching contributions and lower refunds to your employer, National projects they would cut $3 billion out of government contributions to Kiwisaver. That’s what would pay for their tax cuts for the wealthy. A typical tory policy, it hits the middle income earners* hardest to benefit the well-off.

The unions have proposed that, if Kiwisaver must be cut, then it be done by keeping it a 4+4 scheme but capping employer contributions at $20. That way people on incomes up to $26,000 would be no worse off than under the original plan. And anyone earning less than $100,000 would not loss more than 1% of their gross income compared to National’s plan. This wouldn’t save the Government as much National’s plan and would be more costly to higher income earners but would protect people on middle incomes ($20K-$40K).

Key has apparently welcomed the plan, which should be a good thing but raises two worrying questions. How much thought did the Nats put into their changes if they’re willing to ditch it for another one just like that? Or is Key just telling the unions want they want to hear, as he is wont to do? If he is just placating the unions and has no intention of altering his plans, he will get a quick lesson that the tricks you can play in opposition come back to bite you when you have a position of real responsibility.

*(the median income is $27,000, people on incomes between $20K and $40K are over-represented in Kiwisaver)

26 comments on “Unions offer better option for Kiwisaver changes”

  1. All Key was after was another “inclusive and moderate” headline. Nothing more than a cynical PR exercise. Of course the unions couldn’t have said no because the media would have called them sore losers… Just like the media seem to think that when Key gets caught muddying the waters around the economic forcast he’s been the victim of dirty tricks…

    What really pisses me off about teflon-john is that the teflon was starting to wear off until that useless prick Williams decided to add another layer…

  2. Ianmac 2

    I read that all that John Key had said was. ” We will look at the Union Plan.” Hardly an acceptance speech?

  3. Of course Ianmac. This place is nothing without the spin on top. Key actually acknowledges something and you guys still have a go at him.

  4. Tigger 4

    I’m with Robinsod – more of Key trying to appear centrist. Any bets on how long this phase will last – I’m going for three months…

  5. yl 5

    “I’m with Robinsod – more of Key trying to appear centrist. Any bets on how long this phase will last – I’m going for three months ”

    I am going with, until Bill, Gerrie, Maurry, Joyce, and Power get sick of the bullshit, and want to see right wing agenda progressed more quickly, Key will be rolled within 6 months. Dont count out Power taking up the leadership.

  6. Tim Ellis 6

    Where does it say John Key accepted the plan, SP? I mean, really. Just take a step back for once and try and be a bit less hysterical.

    John Key said he would consider the plan. If he had rejected it outright you would have complained that he was arrogant and wasn’t listening to key union representatives.

  7. Tigger 7

    yl – yeah, six months is probably more realistic.

    Though won’t Key do this sort of centrist stuff in public while his razor gang do some right wing stuff that won’t make the front page? If the razor gang can get away with some nasty stuff on the side they may keep Key around as the puppet show…

  8. yl 8

    I think i real worry is this act party – tax payer bill of rights bill – it limits government spending to inflation and population increases i think.

    Just another attempt to drive people towards the private sector, it is a real worry.

  9. Daveski 9

    It’s good to see that this site has adjusted to so quickly to being in opposition 🙂

    Whatever Key does is wrong.

    At the risk of being repetitive, Key appears to have shown a significantly better handle on MMP government than anyone expected. Agreed, it does raise expectations and will lead to greater complexities managing the different agendas. But surely this is the very nature of MMP?

    Most here won’t want to consider the possibility but Key’s actions appear deliberate and appear aimed at building a broad based support that reflects the reality of an MMP.

    If he can do so, particularly to engage constructively on the right and the centre, then Labour is looking at a long time in opposition and that’s what frightens so many here, particularly within HC at the helm.

  10. Tim. I didn’t say he accepted the plan, I said he welcomed it. If you put words in my mouth you can make me say whatever you like but I choose my words carefully.

    If he is genuine about taking on the union plan, that would be great but one would still have to ask how much thought they put into their own plan.

    I suspect though, that as the other says this is just a PR exercise.

  11. Tim Ellis 11

    SP, you said:

    How much thought did the Nats put into their changes if they’re willing to ditch it for another one just like that?

    There’s no evidence that John Key is willing to ditch his plan, which is what accepting the union plan involves. Your whole argument is premised on Key ditching National’s kiwisaver plan. I’m not putting words in your mouth. They are words that you used.

    If you’re going to erect straw men arguments SP, you can’t complain when people repeat back to you what you’ve written.

  12. Daveski 12

    I meant to say that SP actually covered the issue pretty well although I disagree with his conclusion. I’m still not sure why there is opposition to a *minimum* contribution of 2% assuming it’s simply because it was a National policy. The lower threshold must make it more attractive and accessible – it certainly does for me.

  13. Tim. Key said he would ‘consider’ the union plan, that logically means he will be simultaneously considering ditching the National plan

  14. Tim Ellis 14

    Yes, I think I understand that SP.

    What do you think John Key should do when a major sector of the economy presents an opinion to him? Should he say: “Thank you for your input. We will consider it.” Or should he say: “No, we have our plan, this meeting was pointless, we’re not listening to you or going to consider anything you say, please don’t come and see me again.”?

  15. Pascal's bookie 15

    I think Tim is saying that ‘sod is right, and that Key is just spouting BS to help with the ‘centrist’ branding.

  16. Scribe 16

    How often did Helen Clark meet with the Business Roundtable and EMA (Northern) to consider proposals they put forward?

  17. Quoth the Raven 17

    Daveski – Key hasn’t formed a government yet, but it’s not forming a government that will be testing it’s keeping it together. If he can keep it together then you can say he’s got a good handle on MMP.

  18. Tim Ellis 18

    No, I’m not saying that PB.

    I’m saying that when a major union comes along with a policy idea, the Prime Minister should consider it.

  19. Pascal's bookie 19

    Yeah he should, on account of his own ideas aren’t well thought out.

    The question is though, is he actually considering them, or is he just saying he is because telling the union to fuck off would be impolitic. You’ve seemed to argue he’s doing both.

  20. Tim Ellis 20

    Time will tell Pb, but whatever he does no doubt you’ll find a reason to be outraged.

  21. Sarah 21

    What is wrong with tax cuts for the rich?

  22. Tim. He could say ‘we listened to their ideas but we won’t be accepting their recommendations’

  23. Sarah nothing in itself, it’s the cost, the other choices given up, that’s the issue.

    Why not tax cuts that are more equally distributed or better public services, or not slashing Kiwisaver in the first place instead of tax cuts for the rich?

  24. Tim Ellis 24

    SP, that isn’t listening, is it?

    John Key said: “We listened to what they said. We’re going to consider them.”

    I don’t see how you can get outraged with that.

    Heaven forbid that the Greens might approach Key with some policy proposals. How will you feel then?

  25. Tim 25

    I have no argument against Kiwisaver and I think it is one of the best things the last government did. I have to admit being worried when Key said he would cut some of the contributions, but I was pleased that he lowered the entry threshold to 2% as that made it more accessible. One concern I had about Kiwisaver is that it is somewhat elitist. A lot of people I know opted out because they said they couldn’t afford the 4% out of their income. I earn a bit more (and drink a bit less) than them so I have my two pre-school kids (and me) enrolled in Kiwisaver. Now this is where the unfairness of the original scheme kicks in. Of the 800,000+ enrolled in Kiwisaver do we know how many are ‘rich pricks’ and their kids? I’m guessing quite a few.
    So really, how many low income earners are really benefitting from the old 4+4 method, and wouldn’t it be fairer to make it 2+2 after all so the benefits can be spread around more evenly?
    My other gripe about it is why should an employer be forced to contribute 4% to an employee enrolled and not be allowed to account for it as renumeration? That becomes unfair to non-Kiwisavers and should be seen for what it is – inequity.
    Imagine someone on say $20,000 who really can’t afford 4% out of their pay for Kiwisaver, who works alongside another worker on $20k who can afford to put 4% into Kiwisaver. For arguments sake let’s say the former has a family to support and the latter is single. The latter actually gets more from the employer (and the government) than the former. I can’t see how that as being fair at all.

  26. Rex Widerstrom 26

    Unless I’m missing something, isn’t the flaw in the unions’ plan – while superficially attractive – that it would disincentivise people earning over $26,000 from making Kiwisvaer contributions?

    New Zealanders, it seems to me, aren’t good at voluntary saving, which is why I supported Winston’s super scheme and why I support Kiwisaver. Take away matching funds (whether dollar-for-dollar or 50-cents-for-dollar) and you take away the motivator for their contributing, surely?

    On a separate note, I agree with Tim Ellis. I’d like to see a government open-minded enough to genuinely consider proposals from across the board. I’d like to see more politicians who were prepared to admit that the possession of a competing ideology does not render a person foolish, nor invalidate all their ideas.

    I’m not saying Key’s administration is such a government – it’s too early to tell – but let’s not be characterising things as “spin”, “weakness” (if you’re a Tory), or “flip flopping” just yet.

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