Media Coverage, 19 May 2011
Andrew Gawith, Director of Gareth Morgan Investments
Video Transcription
Interviewer: What cuts did the budget announce for KiwiSaver?
Andrew: The three key changes are firstly, the Member Tax Credit has been reduced, or cut in half, from $1042, to $521 maximum a year. But there is a little fish hook in here – in order to get the $521 you don’t just have to save $521 you have to save, still, $ 1042. So it will make it doubly difficult in a sense.
The second change is that they are lifting the compulsory contribution rate from 2013 from 2% to 3% for employers and employees.
But the third change is that they are now to going make the employer contribution taxable. Up until this point that has been tax free.
So anybody on the top tax rate, paying 33 cents in the dollar, will actually find that the additional 1% that their employer is having to pay will go straight to the government. So it’s a nice little tax grab.
Interviewer: Will this discourage people from joining?
Andrew: Well clearly it has made KiwiSaver less attractive than it has been. But to be fair, when Cullen eventually introduced KiwiSaver he added a lot of bells and whistles to it, and the incentives were actually fairly spectacular. So, those incentives certainly have been reduced.
And I would expect that to slow the rate of take up, but remember the $1000 kick start grant hasn’t been touched, so anybody joining KiwiSaver will still get the $1000, even those under 18.
Interviewer: Will these changes still happen if Labour wins the next election?
Andrew: Labour will have to proactively promise to reverse those acts and regulations in order to prevent these changes going through. Labour will have to put up its proposition now, and it’s unclear whether they’re prepared to reverse these changes that National are proposing and will enact.