The winners are:
• Employees who would like to join KiwiSaver but can't afford Labour's minimum 4 per cent of their pay, or are unwilling to tie up that much money until they buy their first home or reach NZ Super age. National's 2 per cent makes it easier to join the scheme, even if the National version is less generous.
• KiwiSavers who joined for the kick-start but are now on contributions holidays because of affordability or reluctance to tie up money. The 2 per cent minimum might enable them to start contributing again and receive the KiwiSaver incentives.
• Employees uninterested in KiwiSaver. They may benefit from National's plan to permit their employers to give non-KiwiSavers a pay rise to match the employer KiwiSaver contributions, as long as employer and employees negotiate this in good faith.
• KiwiSavers who are self-employed or not employed. Their incentives are unchanged and, as taxpayers, less of their money is going into the scheme.
• People over 65, who are ineligible to join KiwiSaver. As taxpayers, they also benefit from the reduced costs of the scheme.
Losers – at least in the short term - include employers, who will no longer receive the employer KiwiSaver tax credit from next April. However, after a couple of years this will be offset by National's plan to keep employer contributions at 2 per cent of pay, rather than rising to 3 per cent in 2010 and 4 per cent from 2011 on.
The way the numbers work, KiwiSaver will cost all employers more under National until April 2010. In most cases this will continue in the following year. But from April 2011 on, employers whose workers earn more than $52,150 will be better off under National.
On balance, the losers also include most employees already in KiwiSaver.
Their employer contributions, currently at 1 per cent in most cases, won't rise past 2 per cent from 2010 on – unless they have a generous boss who puts in more than they have to. Also, while employees can continue their own contributions at 4 or 8 per cent, their tax credit is capped at 2 per cent – lower than under the current system.
What's more, if their employer decides to give non-KiwiSaver employees a pay rise to match their KiwiSaver contributions, they will miss out on that pay rise. In that situation, in effect they pay their own employer contributions.
Even so, they still benefit from the tax credit, which considerably boosts their savings. The tax credit is the only major ongoing incentive that non-employees have received all along, and many of them are keen KiwiSavers.
And there are some pluses for employee KiwiSavers. Those struggling to afford contributions will welcome the chance to switch to 2 per cent. And those who dislike tying up their money could put 2 per cent in KiwiSaver and the other 2 per cent into more accessible savings.
For these two groups, the added flexibility under National may be more important than the reduced employer contributions and tax credits.
In summary, some people's savings will be smaller, some will be unchanged - and more people will actively take part in KiwiSaver.
WINNERS OF BOOK GIVEAWAY
Please see the Investor Column page on
www.maryholm.com for a list of the winners of the giveaway of my new book, "KiwiSaver Max: How to make it work for you". Thanks, everyone, for your interesting entries.
