Manukau Courier

KiwiSaver ‘refresh’ is a wake-up call

- RobStock

OPINION: KiwiSaver is being reviewed, and big changes are on the agenda, including whether or not to strip salaried workers of annual government contributi­ons, making them $521-a-year worse off.

It’s a solid reminder that KiwiSaver is a creation of politician­s, and that politician­s can decide to make it more or less generous at any time.

That’s why it’s important to make the best use of KiwiSaver now, instead of putting it off until later, in the misguided belief that KiwiSaver will always be there in its current form.

Now, I think it’s unlikely that Labour would dare to make radical changes to the $521 government contributi­on many, but not all, KiwiSavers qualify for each year.

Currently, every dollar a person contribute­s to KiwiSaver (except over-65s and under 18s) earns 50 cents of government contributi­on, up to the maximum $521.

Imagine a government telling people that’s off the table,


■ Make the most of KiwiSaver today ■ Understand its features

■ Remember KiwiSaver is a creation of politics

effectivel­y dropping a person’s income by $521.

I should tell you that the idea being discussed would not necessaril­y block people’s access to government contributi­ons. The idea is to make them earn government contributi­ons by making additional voluntary contributi­ons over and above their basic 3 per cent contributi­ons from salary.

This isn’t about Government penny-pinching. It’s about trying to get people to save more.

KiwiSaver has many good things for the saver, but the chief ones are: employers making matching 3 per cent contributi­ons, and the opportunit­y of getting the $521 each year.

Yes, KiwiSaver puts money beyond temptation. Yes, it’s driven down fund fees. Yes, it’s taught a generation to invest. Yes, it helps people save for first homes.

But it is the matching employer contributi­ons, and the $521 government contributi­on, that supercharg­es people’s ability to save something meaningful for retirement.

But take away the $521, and people would continue to contribute 3 per cent from their salaries to get matching contributi­ons from their employers. So why continue paying it?

The debate here is essentiall­y whether the $521 (or whatever the government contributi­on should be) should be an entitlemen­t or an incentive.

If it’s an incentive to get people to contribute to KiwiSaver, it may well not be working, and perhaps should be re-targetted in a bid to getting people to save more (assuming that’s what we want them to do).

If it’s an entitlemen­t, essentiall­y a disguised tax break, then removing it will result in some people paying more tax, if they can’tmake extra voluntary contributi­ons.

And it was a disguised tax break.

KiwiSaver was the creation of a Labour government, which wanted to earn political brownie pointswith a tax cut, but wasn’t into no-stringsatt­ached tax cuts.

To the average salaried KiwiSaver, reversing that tax cut would not be welcome. Nor


Got a question for Rob Stock or an issue you want him to tackle? Contact him by going online to Neighbourl­y and typing the name of our newspaper into the search bar. Click our name and select Contact from the menu bar and ‘‘message our reporter’’ from the drop-downmenu. would requiring them to save more to get it.

For these reasons, I can’t see it happening, but betting against changes to KiwiSaver wouldn’t be wise.

In 2015, the National government removed the $1000 kickstarte­r incentive to join KiwiSaver.

In 2011, it had cut the government contributi­on in half from just over $1040 to $521.

Each of us has to take personal responsibi­lity for learning about KiwiSaver, and getting themost out of it.

Many people are not getting their full government contributi­ons each year. Many are on contributi­on holidays, or opted out of KiwiSaver.

They will all have their reasons, and there are lobby groups trying to get greater KiwiSaver fairness for women, the self-employed, lower-income people and the self-employed.

But it would be hard for people who have not yet started to get the best out of KiwiSaver to wake up one day to its attraction­s, only to find it’s been made less generous.

 ?? ?? Commerce and Community Affairs minister David Clarke has ordered a review into KiwiSaver to see whether it can be ‘refreshed’.
Commerce and Community Affairs minister David Clarke has ordered a review into KiwiSaver to see whether it can be ‘refreshed’.
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