What National’s Kiwisaver cuts mean for you

Written By: - Date published: 4:59 pm, December 22nd, 2008 - 37 comments
Categories: kiwisaver, national/act government, workers' rights - Tags:

kiwisaver-labour-v-national

The Council of Trade Unions has done some research showing a worker with a Kiwisaver account will stand to lose as much as $200,000 in accumulated savings over their working life as a result of the National-led Government’s changes to the scheme.

If you’re on $50k a year then National’s Kiwisaver cuts will cost you $145k over your working life. That’s three years’ wages ripped out of your savings to pay for tax cuts for the rich.

Merry Christmas, New Zealand.

37 comments on “What National’s Kiwisaver cuts mean for you”

  1. How can you spend more money today if you’re saving it for tomorrow?

    Like the NZ Herald editorial the other day, the National Party also sees it as their duty to make us spend our money now……and judging by the way they have done it, cancelling the “Buy Kiwi Made” campaign and giving the money to the rich, they want us to buy imports rather than local goods.

    That’s how they believe Kiwis will be more productive and earn more money.

    Clear?

    Hardly. But that’s what they are DOING…..regardless of what they are saying or what they THINK they are doing.

  2. 8 & 4 2

    Hang on a minute – this should be covered in a select committee. I’m sure the flaws will be spotted then and fixed up. And the public will get a say on all this. Oh yeah. That’s right…

  3. Johnty Rhodes 3

    Have you taken into account the extra tax that we will keep under Nactional, when Labour would have cancelled the 2009/10/11 tax cuts in their December Budget?

  4. Bill 4

    This to-ing and fro-ing over Kiwi Saver. Anybody wish to explain and justify to me why I should invest in my oppressor?  Lets get this straight. I will break your legs and so you should invest in my crutches research company.

    Surely it can only sensibly  be a case of  “Fuck right off!”

  5. What I look forward to is what Labour’s policy will be going forward. With an $11b cash deficit in a couple of years, will Labour promise to borrow and spend even more to restore KiwiSaver?

    In fact what will Labour offer in three years? It won’t be able to offer extra spending with much credibility, due to the huge deficits and debt. So presumably they will campaign on tax increases – that will be fun!

  6. Pascal's bookie 6

    David, eventually Labour will probably run on tax increases, they’ve done so before. Romped home if I recall. But never mind what the LP will be saying in three years. National is the government now.

    How does National plan on paying back those deficits. The Laffer plan? How’d that work out for dubya? Or will they just ignore the debt, and play to their followers religious belief in the ever shrinking tax rate knowing that the Labour party will take care of it like grown ups while National can bellow about the unjustness of paying back debt like the trust funded teenagers on a bender that they are?

    Sounds like you’re out of ideas and looking to poison the well about the only eventual option, the health of the nation’s accounts be damned as long as right wing dogmas about tax don’t get criticised. Sad.

  7. I’d welcome Labour promising to make people pay more tax at the next election.

    As for your other points, National’s economic plan has been published dozens of times. More spending on infrastructure, less spending on bureaucracy, lower regulatory costs, lower taxes to increase consumption,

    KiwiSaver as announced in 2007 is unaffordable in 2008. Even the Nats version of KiwiSaver may prove to be untenable. Having the Govt borrow money to help people save is not a good business model.

  8. John BT 8

    How come David bloody Farrar gets to make reasonable and logical comments on this blog?  He should be banned.

    [lprent: ummmm that explains why all of your comments go into moderation]

  9. Joshua 9

    By the same token, aren’t 2008 tax cuts likely to be unaffordable in 2009?

  10. ak 10

    Farrar:  What I look forward to is what Labour’s policy will be going forward.

    Now I’ve seen it all.   A tory clamouring for policythree years out! (luurve the new feature Lynn)

    No need for your GP to check your gall, David: it’s in the rudest health possible.  On the other hand, I feel your condition would benefit from a thorough regimen of vigorous and repeated prostate checks. Going forward, of course.

  11. Pascal's bookie 11

    Is this the real DF? Just asking because he usually signs as DPF in some places though I’m not sure about here.

    In any case you seem to be saying that National doesn’t have a plan to pay back debt. Just some voodoo or underpants gnome idea about tax cuts (mumble bureaucracy mumble lower regulatory costs). Even with National’s economic plan as announced, there are deficits out to the horizon. What is National’s plan David? Can I infer that National just plans to do it’s usual crap then? Use the bad state of the books as an excuse to trash the public sector and cut back on ‘unaffordable social spending’?

    Last time around that led to (amoung other things) massive overcrowding in south Auckland with 2,3 or 4 families to a house and the appearance of diseases usually only seen in the third world.

    Things got so bad Labour ran on a policy of tax hikes and the Tories got booted. Great plan.

    All because national can’t seem to see that there is no ideal tax rate, good for all times. That taxes need to rise and fall seems to be obvious from even a cursory reading of history, and yet…

    Can’t argue with religion though. Have a good xmas.

    [lprent: Yes why do you think I put the identicons in]

  12. Ari 12

    What I look forward to is what Labour’s policy will be going forward. With an $11b cash deficit in a couple of years, will Labour promise to borrow and spend even more to restore KiwiSaver?

    I thought we established that National was the borrow-and-spend party. Labour has, up until the last year of the last term, been a tax-and-repay-debt party, and only broke that trend in order to pull the rug out from under National’s major campaign promise. (Tactically brilliant, strategically dumb: sticking to the principle that such broad, untargeted tax cuts are irresponsible would have been much better in the long-term) Hence why the economy is in such good shape compared to the rest of the world.

    KiwiSaver as announced in 2007 is unaffordable in 2008. Even the Nats version of KiwiSaver may prove to be untenable. Having the Govt borrow money to help people save is not a good business model.

    Hah. Not having a workable savings scheme is even more unaffordable. Kiwis come to New Zealand for the lifestyle. A good incentive to save for retirement is probably one of the best things we could do to repatriate New Zealanders after they’ve gone overseas for some job experience. (Which incidentally is something your side of the political spectrum has claimed to care very much about) During a recession is the time when you need to spend. Cutting back government programs is just idiocy. If you’ve been good and paid off enough of the debt, you can be careful and put in the infrastructure, training, and employment incentives you need for a successful economy.

  13. Ari 13

    I should also point out you’re assuming they won’t reverse National’s tax cuts. (or rather more likely, stick with the cuts to the lower band and reinstate a more progressive curve from there) That would easily give them some spending leeway in the next term.

    Hopefully by then, however, we might be seeing the Greens big enough and well-positioned enough to actually have some influence beyond the individual-bill stage.

  14. When the consequences of the deficits National will run begin to hit home, tax increases won’t be a tough sell at all.
    How soon people appear to have forgotten that the icrease to 39% at the top end was not an electoral liability for Labour for years. Only after a relentless propaganda campaign from Fairfax and APN for literally years did the idea of “tax cuts” begin to gain any traction.  When people realise how little of that money they actually get to keep, they will see how pointless it was.
    Any Contact Energy customer in Wellington and the South Island has ALREADY had their tax cut eaten by the increase in power prices…..if they stayed with Contact.
    New Zealand’s economy is full to brimming with cost-plus, oligarhical / monopolist, ticket-clipping, self-styled “entrepreneurs” who couldn’t run a lemonade stand if there was any real competition.
     
     

  15. David: “As for your other points, National’s economic plan has been published dozens of times. More spending on infrastructure, less spending on bureaucracy, lower regulatory costs, lower taxes to increase consumption,”

    That isn’t a policy. It’s a slogan. A grab bag of unfocused, undefined and ill-founded prejudices and preconceptions.
     
    Which bureaucracy gets trashed? The expensive ones deliver important services and protect stuff that’s important from people who don’t know any better.

    Lower regulatory costs? Which regulations get trashed? Protecting the environment? Even though we have one of the worst records anywhere for looking after soil, water and air? Never mind on climate change – despite reports of *rapidly* accelerating change appearing daily? National wants a review….and will do nothing for ANOTHER year. The melting ice doesn’t care…….

    “Lower taxes to increase consumption” – of what? National has trashed “Buy Kiwi Made”. Who else’s economy will we be helping through imports while we run down our own services? How will reducing the rights of workers, allowing lower wages, longer hours and worse conditions make us more attractive than going to Australia for a decent wage and better employment protections? It won’t.

    National’s “policy” is a collection of prejudices – nothing more. Sacking thousands of civil servans right now will be a GREAT way to get the economy going!
    The Nats haven’t got a clue….and the folks who voted for them clearly don’t know enough about a whole host of things to cast an truly infomred vote. Of course, they won’t belive that for moment…..but the evidence all around is is more than clear enough that is is EXACTY what they did.
     
    Believe what you like….”Faith” doesn’t care what the facts are. But reality won’t be forgiving when the day of reckoning comes here as it has already come to the US – where these policies have been tried and failed *spectacularly*.  

    Big tax cuts and huge deficits? Bush did that in 2001……and look where it got him.

    But “not arrogant” National has never really done reality…..not prior to 1999 and – clearly – nothing has changed.
     

  16. Westminster 16

    I love this “what Labour would have done” stuff.  Apparently, for National supporters, the only effective way of defending their party’s decision making is to argue the straw man that Labour “would have” done something even worse.  Classic. I wonder when it will dawn on them that Labour is now in Opposition and National has to take responsibility for its actions in government. Hypotheticals are not a good way of making public policy. 

  17. lprent 17

    Ok. I screwed up and put a non-tweaked tiny MCE comments update in. I fixed it up just so peoples eyes were not damaged.

  18. Lew 18

    Westminster: Technically, it’s both a straw man and a counterfactual. Doubly fallacious!

    Oh, and if you’re accurately rendering the typical style, it’s `would of’ 😉

    L

  19. milo 19

    So giving every worker half a million is sustainable now, is it? How does that work then? Or if it’s their own money, are you now encouraging private incentives? I just can’t figure it out.

    You guys are soooo last election. Got to get constructive.

  20. Pascal seems unable to actually debate the economic situation. Of course there is no plan to pay back debt – paying back debt looks to be impossible for the next decade. There is a plan to borrow less, than would otherwise be the case, but no political party will be paying back debt for a very long time.

    As for government spending, the plan is to increase it at a slower rate than previous growth. That is different to cutting it.

    You seem obsessed with the tax rates. National’s tax cuts did not increase the deficit or debt – nor did they particularly impact current spending – they were almost totally funded by reducing KiwiSaver subsidies – which is very different to touching current social spending on health or education.

    Ari says that “Not having a workable savings scheme is even more unaffordable.” When you are borrowing every cent you save, it is not a savings scheme. You have to have the money to save it.

    Ari also fails basic economics by arguing to maintain Kiwisaver subsidies and argues that during a recession is the time when you need to spend. Borrowing money to stick into savings scheme adds little to boosting the economy. During a recession you want money spent – through tax cuts or current government spending. Borrowing money to stick into retirements savings that can’t be accessed for 30 years is the worst thing for a recession – that money is needed now.

    Your defence of all government spending is also misguided. The focus should be on infrastructure spending.

    Steve Withers also makes the same mistake and thinks National tax cuts have added to the deficit. They have not – they were funded from KiwiSaver reductions.

    Anyway great to see so many people advocating Labour should campaign in 2011 on tax increases, such as they did in 1999. Please keep up the advocacy.

  21. Oh I love it! DPF comes in to tell everyone how wrong they are about economics! Tell me David – do you still think the Labour govt should have cut taxes in 2005? If not why not?

  22. Peter Burns 22

    Hi Robinsod – can you tell me how many Labour Ministers are facing criminal prosecutions or have appeared in the dock in a District Court since 2005? Sorry I have lost count, Trevor , Phillip etc…etc….

  23. Kerry 23

    I think the appropriate term for righties is WRECKERS AND HATERS……

  24. RedLogix 24

    In the meantime Australia continues to build it’s nett worth with a compulsory 9% savings scheme. I guess that is one comparison with Aus that we won’t see John Key making anytime soon.

    The cash put into Kiwisaver is not locked up for 30 years, it is immediately reinvested, both domestically and internationally and generates returns. It is not being tossed into a big hole in the ground. What Kiwisaver does is divert cash from short-term expenditure to long-term investment. What National is doing is the opposite, destroying long-term investment in favour of short-term consumption.

    It means that when NZ wants to build infrastructure, or fund productivity investment, we have to borrow offshore. It means that we continue with a deeply unbalanced investment income profile, with many billions of dollars being repatriated offshore by overseas investors and businesses, with only a few pitiful millions coming back the other way.

    It means that our current account deficit will continue to rocket toward danger levels, because we are doing nothing to address the structural imbalance that is causing it.

    Fundamentally it has been the failure to invest for the long-term that is the underlying factor causing the crisis we face, both locally and globally. Short-term profit taking made from credit card funded consumption, financial trades, securitisations, futures and derivatives, greed and outright fraud are the causes of the collapse we are facing.

    National’s prescription is more of the same poison that is already killing us.

  25. Joshua 25

    Good analysis RedLogix.

    Another interesting point to ponder is “what good’s a tax cut if you don’t have a job anymore?”

  26. J 26

    “I thought we established that National was the borrow-and-spend party. Labour has, up until the last year of the last term, been a tax-and-repay-debt party”

    This assertion would be correct if you ignored the past 7 years of the strongest economic growth NZ has had in living memory during Labour’s term due to low interest rates and high primary produce prices vs what looks to be a economic depression coming our way in Nationals term forcing them to borrow (unless of course you like public sector service cuts).

    But hey don’t let the facts get in the way of a good post.

    Weak.

  27. RedLogix 27

    J:

    Govt fiscal policy and the global economic environment are of course mutually linked and do not exist in isolation from each other.

    But you also ignore that fact for much of the last 7 years National led the chanting pack demanding tax cuts, cuts that if they had been implemented, would have necessarily led to much higher public sector debt levels.

    You ignore also that National have just passed into law, tax cuts that will necessarily mean that govt will have to borrow more to fund the grim looking deficits being currently predicted.

    A sane balanced Keynsian policy is to save and reduce debt in the good times, and draw down on the resulting reserves of credit in the bad times. Now the rainy days have most certainly arrived, National would not only have failed us on the first requirement, but has now committed this country to far greater deficits and debt levels than any of us should be at all comfortable with.

  28. John Dalley 28

    Peter Burns – Alias d4j (Dick for Justice) DPF let’s you talk rubbish, why don’t you stay with Kiwiblog, at least David still allows your trash talk.

    [lprent: Since he started as PB, I haven’t had cause to notice him. The ‘general*’ rule around here is that it is your behaviour that causes issues, not who you are. In other words I apply a ‘what I can see’ filter to my comprehension in moderator mode.

    On the other hand, I noticed your comment as a possible flame starter. Don’t do it.

    * Of course as with every rule there are exceptions. There are some people that just get me severely annoyed because of their long-term blubbering.]

  29. Peter Burns 29

    Always wanted to know who big bruv was.

  30. Graeme 30

    Didn’t the unions get National to agree to matching dollar for dollar up to $20? (i.e. not 2% + 2%, nor 4% + 2%).

    The graph seems to completely ignore this concession. Is there a reason why the unions would ignore something they got the Government to change?

  31. IrishBill 31

    Graeme, if you had bothered to click through to the CTU page linked in the post you would realise it is related to the employer contribution not the government one.

  32. vto 32

    Govts around the world are soon to be so burdened with debt that trouble will arise. Burdening taxpayers with unrequested obligations to such an extent (e.g. $US130,000 per person in the US, or some silly similar number) will result in taxpayers considering refusal to honour these obligatons that they did not ask for. Equals weakened govts and societal structure. The system will groan under the pressure, and cracks will appear. The goose will bite back at the hands that pull too many feathers…..

  33. Mark M 33

    The tax payer cant afford kiwi saver as it was and even the reduced version National is offering.
    A dose of reality is hitting world economies , hopefully soon it will hit here and the people in this country who for so long have existed off the efforts of other tax payers will realise that you need to earn money before you can spend it.

  34. Pascal's bookie 34

    Geez David. I mean really.

    Of course there is no plan to pay back debt – paying back debt looks to be impossible for the next decade.

    So National has no plan for paying back debt. Like I said. The decade bit is a distraction of your own insertion.

    You seem obsessed with the tax rates.

    Hah. I guess that’s why you brought them up. I mean shit. National policy has been for the last ever so very long:

    “We will cut taxes. You Can’t trust Labour not to cut taxes. Labour over taxes you. Surpluses are theft. Too much tax. National equals tax cuts. ”

    Seriously David. I’m obsessed with tax rates? Get a fucking grip.

    You make a comment about how ‘Hopefully Labour will run on a tax hike policy next election and how wouldn’t that be like totally funny and awesome and shit.’ I say that eventually Labour will probably raise taxes given that the National party are retarded about taxes and can’t seem to work out how to pay back debt. As you tacitly admit.

    “Anyway great to see so many people advocating Labour should campaign in 2011 on tax increases, such as they did in 1999. Please keep up the advocacy”

    No one said that David, that’s just your own BS line. People are saying that Labour will at some point have to raise taxes. This will probably not be the killer in the electorate that seem to think it will be, because the electorate actually like having a government that can fund a decent social infrastructure. That’s why Key ran on ‘Labour plus’.

    In 2011 David, I doubt Labour will be looking to raise taxes. There are a number of things that National is going to have to make it’s mind up about though. Asset sales for one. Maybe they will just punt that till 2014.

  35. Ari 35

    So giving every worker half a million is sustainable now, is it? How does that work then? Or if it’s their own money, are you now encouraging private incentives? I just can’t figure it out.

    Effectively the incentive is a targeted tax cut. (And please, don’t exaggerate the impacts- nobody’s being handed half a million instantly. They’re getting small sums that could potentially add up to that much over a half-century or so of saving) Or, if you like, it’s mostly their own money, with some subsidies for those who are on low wages and have Working for Families to greatly reduce their tax costs. I’m not a big fan of running detailed maths, but I’d be doubtful that National’s plan will actually end up subsidising anyone. So they’ve taken a very effective targeted tax cut that could well have helped our culture of debt… and turned it into a less effective, untargeted regressive tax cut. Genius 😛

    And yes, Kiwisaver should be sustainable in any responsible policy program. In fact, I’d say a government-backed retirement program is just as important as a health system in a modern nation. It’d be a big item on budgets, but the only reason it’s being cut back is so that National doesn’t completely balloon the national debt with their tax cuts for the very wealthy on top of their promised infrastructure spend. It’ll work on 2%, but it won’t address our debt levels the way it could at 4%. Labour was looking to make real inroads into the debt generation with Kiwisaver- we’ll just have to hope that National picked a sweet spot in their scale back plans, and that claims they’ve gutted it are wrong.

    You seem obsessed with the tax rates. National’s tax cuts did not increase the deficit or debt – nor did they particularly impact current spending – they were almost totally funded by reducing KiwiSaver subsidies – which is very different to touching current social spending on health or education.

    National’s regressive tax cuts were the only significant point of difference in the two old parties’ policy plans. So, firstly, if we buy your line that the tax cuts aren’t funded by borrowing, (Which is kind of difficult when they’re your biggest spending item and you’re borrowing about as much as they cost) we still have the problem that National has scaled back a wildly successful targeted tax cut that everyone seems to agree was great in order to give extra untargeted tax cuts to everyone that amount to chump change. Remind me who’s supposed to be the party that has a handle on economics? Because it’s certainly not National.

    Ari also fails basic economics by arguing to maintain Kiwisaver subsidies and argues that during a recession is the time when you need to spend. Borrowing money to stick into savings scheme adds little to boosting the economy. During a recession you want money spent – through tax cuts or current government spending. Borrowing money to stick into retirements savings that can’t be accessed for 30 years is the worst thing for a recession – that money is needed now.

    If you borrow less money than you pay off, then yes, it is useful. The recession is a short-term one that we’re already lifting ourselves out of thanks to Labour’s economic management. I agree that you want to circulate money around the local economy during a recession. I disagree that our culture of debt is not such an urgent problem that it needs to be put off until after we’ve dealt with the economic downturn. That’s just stupid, as it will push people further into debt.

    I also wasn’t referring to kiwisaver with the cut spending. I was referring to the plans to cut the public service, the closing down of the insulation fund which everyone seems to agree will pay for itself in the long term, and several other initiatives… to pay partially for tax cuts, and partially for the big Road/Broadband spendup. (which, again, is poorly targeted)

    Your defence of all government spending is also misguided. The focus should be on infrastructure spending.

    That’s where my focus is, but there are other important issues to resolve such as national and personal debt, the basis of our economy on unsustainable resource use, the fact that our biggest export is essentially water, and National’s intent to scare beneficiaries and low-income workers in a time when confidence is already low.

    Long-term problems will always trump short-term ones if we continue to make no attempts to address them, and this government is looking like it’s stuck in the short term even more so than the previous one.

  36. Graeme 36

    Sorry IB – I’m on my parents dial-up at the moment 🙂

  37. john 37

    we were already on 2 percent our company was already a year ahead ive worked out i am going to loose 40 dollars a week next year.so much for the oh so wonderful tax cuts.

    what message is national sending i am takeing it as national doesnt what us to save at all ,national doesnt what a build up of stable new zealand based capital funds national wants new zealand exposed to instability of off shore capital. national would pefer new zealanders to be in dept up to there arm pits and paying high interest to the day they drop dead.

    national says its for private public paternerships (but only with the generous benofactors of national) ppp could have been kiwi saver funds.

    national says its for privateisation of the best state assets( but only for mates of national) again privateisation if we must have it could have been kiwi saver funds.

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