- April 2026 – 3.5%
- April 2028 – 4.0%
- April 2029 – 4.5%
- April 2030 – 5.0%
- April 2031 – 5.5%
- April 2032 – 6.0%
This will basically align us with Australia that also has 12% contributions.
1. I think this is a good move, for two reasons.
People will tend to save more when their contributions are taken out of their pay before they even reach their bank account. Expenses often rise to match income, so having the savings taken out at source helps save. I have my KiwiSaver set at the maximum 10% contribution rates, so that the money goes to my retirement savings before I even get a chance to spend it! This is also why PAYE tax is so effective. People would pay a lot less tax if they had to send a cheque into IRD every month.
2. I want private retirement savings to increase, so the burden on taxpayers of the public superannuation scheme can decrease. Once you have a generation of NZers who have been contributing 12% of their salary into KiwiSaver, they won’t need such a generous NZ superannuation scheme. These changes would see a new worker have $1.4 million in their KiwiSaver account at age 65. They then won’t need $414 a week from the taxpayer.
This will have an impact on employees and employers. They are:
- Net take home pay for employees will be 3% lower on a 6% contribution rate than a 3% contribution rate. But this is over seven years. Over seven years wage rates will increase by around 33% nominally, so take home pay will be 30% higher, rather than 33% higher. Also worth noting employees can stay on a lower rate than the default rate if they face hardship.
- The cost to employers of staff will increase 3% over seven years. Now again this will be on top of a probable 33% or so increase anyway.
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
1 comment:
What everyone in NZ debating the Oz Compulsory Super Scheme vs Kiwisaver keeps missing is the fact that Australian Superannuation Contributions are taken out of an employees gross pay....not Net.
Which means they are pre-paye tax contributions.
This means several things:
1 - Job ads are published with the wages/salary being either inclusive or exclusive of super....so exclusive of super means you're paid 12% super on top of your wages. (Those in really high demand can even make their employer pay more into super)
2 - Employers pay into their employees super scheme once a quarter...so employers hang onto the cash longer. (Many employers go broke and fail to pay any super at all. Despite this being a criminal offence - I've yet to see any employer go to jail for it.)
3 - Employees don't co-contribute to their super...you could argue this one any way you want...of course they contribute because their wages might be 12% higher if employers didn't have to make super contributions.
4 - high income earners, contractors and business owners can leverage the fact that super is a "before tax" contribution to lower their own final taxable income to a lower tax bracket.
5 - High income earners, contractors and business owners can also make "before tax" contributions to spousal super accounts....again lowering their final taxable income.
These are just some of taxation loopholes that exist in Australia that don't exist here - but its the loopholes that make the overall populace richer - by genuinely encouraging and incentivising early super contributions - its even fun trying to figure out how to reduce your annual tax bill or maximise your tax return - instead of just tax tax tax.
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