News | Features
4 Dec 2024 21:54
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    Non-Kiwisavers’ Reasons Don’t Stand Up To Scrutiny

    Many New Zealanders who haven’t joined KiwiSavers are missing out on their fair share of the government booty because they misunderstand how it all works. Meanwhile, others in the scheme are not getting as much as they could out of it.


    These two conclusions come from reading a new Inland Revenue report on KiwiSaver. In this column we’ll look at why many reasons for not joining are not valid. Next time – in two weeks – we’ll look at how KiwiSaver members could do better.

    The main reasons eligible people have not joined KiwiSaver are as follows – with my comments added:

    • Almost one third said they couldn’t afford to.

    Two per cent of pay – the minimum employees must contribute – is less than $12 a week if you earn $30,000 and less than $20 a week if you earn $50,000. And after a year, employees can take a contributions holiday and then contribute nothing, or less than 2 per cent.

    Non-employees don’t ever have to contribute anything – although it’s best for everyone to put in up to $1043 a year, to maximise the tax credit.

    There are people who really don’t have any spare money. But not all that many. Consider what would happen if you lost your job and found another that paid 2 per cent less. You wouldn’t starve. As a union official recently said to me, “When members say they can’t afford KiwiSaver, I tell them to cut out a couple of beers a week.”

    • About 30 per cent said there were “either better ways to provide for their financial security, or it was currently better for them to pay off mortgage or student loan debt.”

    I doubt it. Given the KiwiSaver incentives – which double or triple people’s contributions, and more in the first year – it would be a rare investment that performed as well.

    Same goes for repaying mortgages and student loans. Normally it’s great to get rid of debt – especially credit card and other high-interest debt. But number crunching shows you will almost certainly end up wealthier in KiwiSaver than making extra payments on a mortgage or student loan.

    • More than a quarter hadn’t got round to joining.

    For every month you delay, you miss out on up to $87 of government money – as well as compounding returns on all contributions.

    For the young, putting off joining for two years could mean retiring with $100,000 less. Sure, inflation will erode that. But at 2 per cent inflation over 40 years, it would still buy what $45,000 buys today – not a bad round-the-world retirement trip.

    • A quarter worried about lack of security, or that the government may make the scheme less attractive.

    On security, there are KiwiSaver funds run by solid institutions that invest only in government and bank securities. That’s about as safe as it gets.

    On changes, yes, governments are sure to dabble with the scheme. But that’s all the more reason to join now, while it’s so good. If you don’t like future changes, go on a contributions holiday.

    I can’t imagine a government stopping those holidays unless it makes KiwiSaver compulsory. And in that case you will be put into the scheme anyway – and wishing you had joined now, when the incentives were so powerful.

    Interestingly, only 16 per cent of non-KiwiSavers said they hadn’t joined because their money is locked in - usually until retirement or buying a first home. Meanwhile, 32 per cent of members said they joined partly because of the lock-in – presumably because they would otherwise be tempted to spend the money before retirement. It takes all sorts!

    © 2024 Mary Holm, NZCity

     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    RUGBY RUGBY
    All Blacks second five Jordie Barrett is ready for more rugby to close out 2024 as he embarks on a temporary chapter abroad More...


    BUSINESS BUSINESS
    Trademarks that will never be used can be ‘bad faith’ business – a UK case has lessons for NZ and Australia More...



     Today's News

    Entertainment:
    Cardi B has been "partying hard" since her split from Offset 21:44

    Law and Order:
    Police are going door-to-door in Tokoroa looking for information on the mysterious death of Shane Edwards 21:17

    Entertainment:
    Selena Gomez doesn't "need anyone's approval" 21:14

    Entertainment:
    Kerry Katona was left terrified when masked thugs raided her property while she was at home 20:44

    Entertainment:
    Meghan, Duchess of Sussex is reportedly preparing to launch her lifestyle brand and her new Netflix show in the New Year 20:14

    Entertainment:
    Blur's Alex James almost went bankrupt when work dried up during the COVID-19 lockdowns 19:44

    Entertainment:
    Lala Kent doesn't intend to "reach out" to her 'Vanderpump Rules' co-stars after she was axed from the show 19:14

    International:
    South Korean President Yoon Suk Yeol could be facing impeachment after martial law declaration — here's what that process looks like 19:07

    Politics:
    More than 112-thousand people are homeless in New Zealand 18:57

    Entertainment:
    John Legend feels "so lucky" to be married to Chrissy Teigen 18:44


     News Search






    Power Search


    © 2024 New Zealand City Ltd