Leave KiwiSaver alone: Commentator
Governments need to stop tinkering with KiwiSaver, one banking commentator says.
Monday, September 1st 2014, 6:00AM 
2 Comments
by Susan Edmunds
Claire Matthews, of Massey University, said it was disappointing to see National proposing further changes to the scheme.
It announced last week it would increase the amount of money available as a deposit subsidy to first-home buyers purchasing a new home, and allow them to withdraw their member tax credits as well as their savings.
Matthews said: “KiwiSaver has been in place for seven years now. Politicians of all hues need to accept it is good for the country, and recognise that it is designed to help New Zealanders prepare for retirement and stop trying to use it to achieve other objectives. When it comes to KiwiSaver, the key message to all parties is they should stop messing with it.”
She said first-home buyers who withdrew money for a deposit were disadvantaged in terms of their retirement savings.
Politicians are going into the election with a range of different proposals for the retirement savings scheme.
Labour would make it universal and use contribution rates as a monetary policy tool . It would allow the Reserve Bank to increase KiwiSavers’ savings rates instead of increasing the official cash rate.
The ACT party wants contribution rates for both employers and savers to be set on a voluntary basis. Spokesman Robin Grieve said the system as it was encouraged oversaving among young people and undersaving in those closer to retirement.
United Future wants a form of flexi-super, where people could claim a smaller pension from the Government if they retired at 60, or a larger one if they worked until 70.
NZ First would allow money to be withdrawn for education and to buy a first home. Matthews said that could significantly disadvantage members at retirement, especially if they were funding the education of other family members.
Mana’s John Minto said all political parties should give some thought to what their policy would be in the event of a KiwiSaver fund’s failure.
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Comments from our readers
You are taxed 3 times on your Kiwisaver.
You pay tax on the money before you put it into your Kiwisaver.
The investment earnings are then taxed.
Then when you retire, and you invest the money from your Kiwisaver into income producing funds, you will be taxed again.
The government will eventually make a lot money from your KiwiSaver
The government put in an initial $1,000 plus they contribute $10 per week or $520 pa., but then they tax the investment earnings..
What’s the difference – tax at 17.5% ?
Example - a KiwiSaver with total contributions of $500 per month x 25 years.
At a 6% gross return (no tax) it will grow to $349,000.
Taxed at 17.5% it will grow to $298,000.
In this example the government will have “contributed” $13,500 and taken back over $50,000 !
Punitive !! And they say they want to encourage Kiwis to save. Tui.
Same example as above but taxed at 28%
At 6% gross return (no tax) it will grow to $349,000.
Taxed at 28%, it will grow to $272,000.
In this example the government will have “contributed” $13,500 and taken back over $77,000.
Is that scandalous or what ?
In time, a huge money spinner for the government coffers
Once a couple of million people get into KiwiSaver and their accounts really start to grow, the government will be making – no, taking - heaps more in tax revenue.
Perhaps it is time we all started to tell our MP’s what we think.
MP’s are our employees - remind them often & make them work for you
In the USA, people form lobby groups and really hassle politicians on issues that they want fixed or changed.
In NZ we don’t lobby them, but we should.
Most countries offer some savers some tax incentives
Many western countries have tax advantaged superannuation schemes. Why not us?
Last but not least, voters should ask their MP's why their super scheme is so generous ?
Lobby Lobby Lobby
Before the election, send your MP or favoured election candidate an email, and tell him/her that if they want your vote:
- they need to promise to leave KiwiSaver alone ( or improve it).
- they need to promise to look into reducing the internal taxes on KiwiSaver – pronto!
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Ironically this provides growing impetus for consumers to seek advice about their financial circumstances