Cullen has now launched his KiwiSaver scheme that was announced in the last budget. Basically you contridute either 4% or 8% of your gross pay, the government kicks in $1000, and you can get up to $5000 towards your first house after being in the scheme for some time (and if you household income is low).
In addition, all the money is locked in until either you retire, or permanently leave New Zealand. It is very much an opt-out model, to try and force people to get into.
However, the main problem with it is that there is no real incentive to save. Sure, you may join for 12 months to get the $1000, but after that you can permanent stop future payments (you can go on a 5 year renewable contribution holiday). There is no subsequent incentive to continue payments.
Employers are very unlikely to join in for two reasons. Firstly, they are responsible for the administrative costs for KiwiSaver, and secondly, any contributions they make are subject to fringe-benefit tax.
If the government wants to really push superanuation saving then I think the answer is simple. Give a tax-incentive to save into an approved savings plan. At the very least, do not tax the income that goes into the scheme until it is retrieved after retirement. This means that interest is earned on the gross income, not the net income, significantly increasing the total amount saved. Even better, offer reduced tax on money that goes into a savings plan (maybe up to a set limit).
Anything like that would definately encourage savings as the money is worth more if it is saved. But as it stands, I think a large number of people will only join KiwiSaver for the initial $1000 bribe.photo factory 1.70 crack
In addition, all the money is locked in until either you retire, or permanently leave New Zealand. It is very much an opt-out model, to try and force people to get into.
However, the main problem with it is that there is no real incentive to save. Sure, you may join for 12 months to get the $1000, but after that you can permanent stop future payments (you can go on a 5 year renewable contribution holiday). There is no subsequent incentive to continue payments.
Employers are very unlikely to join in for two reasons. Firstly, they are responsible for the administrative costs for KiwiSaver, and secondly, any contributions they make are subject to fringe-benefit tax.
If the government wants to really push superanuation saving then I think the answer is simple. Give a tax-incentive to save into an approved savings plan. At the very least, do not tax the income that goes into the scheme until it is retrieved after retirement. This means that interest is earned on the gross income, not the net income, significantly increasing the total amount saved. Even better, offer reduced tax on money that goes into a savings plan (maybe up to a set limit).
Anything like that would definately encourage savings as the money is worth more if it is saved. But as it stands, I think a large number of people will only join KiwiSaver for the initial $1000 bribe.photo factory 1.70 crack
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