KiwiSaver

Westpac New Zealand today announced details of the Westpac KiwiSaver scheme, pledging to help businesses with the Government’s KiwiSaver initiative. The Westpac KiwiSaver scheme is designed and managed by BT Funds Management, (BT ) Westpac’s investment arm.

Westpac New Zealand’s Head of Wealth Management, Tracey Berry said that, Westpac’s KiwiSaver solution is focussed on making KiwiSaver easy to understand and to use for employers and customers alike.

“We are hoping to take the hassle out of KiwiSaver by making it extremely easy for employers to choose a scheme, and give their staff access to a great KiwiSaver solution,” she said.

A key feature of the Westpac KiwiSaver Scheme includes giving customers the ability to view their KiwiSaver account on-line alongside any Westpac accounts they might have.

Business customers will be able to make scheme payments online through Westpac’s new Business Online Banking service which facilitates bill payments, payroll, tax and other regular transactions over the internet.

An attractive feature of the Westpac KiwiSaver scheme is its Capital Protection investment option which is designed to protect the investor’s contributions at maturity.

“We are aware that there is a large part of the New Zealand population for whom superannuation schemes are an unknown quantity and the capital protection plan was designed by BT with them in mind.” Explains Berry

Due to launch on 1 July, KiwiSaver will be promoted by the Inland Revenue but many businesses are currently believed to be unaware of the extent of their KiwiSaver responsibilities.

To address this issue, from 23rd May, Westpac is hosting a number of briefing seminars to help businesses learn about their responsibilities and the Westpac KiwiSaver scheme. These seminars will be free to attend and will take place all over the country.

Berry said that now is the perfect time for businesses to take the time to review the investment statements of the various schemes and evaluate what is on offer.

“At Westpac, we are helping businesses to do their homework, consider and understand their options carefully and then actively choose a product that suits them and their employees’ interests best. I’m confident that for many – the choice made will be the Westpac KiwiSaver scheme.”

“Post-budget, it’s becoming clearer that for some businesses, the tax cut in last week’s budget will be effectively wiped off the books, or at least substantially offset by the cost of KiwiSaver,” say Ernst & Young budget spokespeople Jo Doolan and Aaron Quintal.Ernst & Young is recommending businesses take steps to calculate the impact of employer contributions, and have their calculations checked, before entering wage negotiations.

Ernst & Young’s modelling of the proposals suggests some businesses may be in for a sharp surprise.

“The Government’s prediction is that tax credits will account for half the cost of an average firm’s wage bill, but talking about averages is false security,” says Doolan.

As a rule, the KiwiSaver employer tax credit will only fully fund the employer contribution if staff are paid no more than:

From 2008 1% employer contribution $104,000
From 2009 2% employer contribution $52,000
From 2010 3% employer contribution $34,667
From 2011 4% employer contribution $26,000

“Those who pay their employees more than a basic wage will end up bearing a substantial cost. An open book policy on figures – agreed in advance by both parties to wage negotiations – is going to be crucial.

“Business be warned. When compulsory super was introduced in Australia it was a result of an agreement with the Unions that this was instead of a round of wage increases. In New Zealand, the Government appears to be saying that this sort of compromise would be a good idea, but each business must negotiate.

“The great hope of the budget – that business would use the tax saving to invest in measures to increase productivity – is dimming by the day.

“Instead the hoax is giving a tax cut to business on one hand and telling them on the other that they have to pay into employee savings accounts.”

National today voted against the Budget legislation, underlining its opposition to the very initiatives that will help to build a stronger economy and a fairer society, Finance Minister Michael Cullen said today.”Last week it voted against the company tax rate cut, the employee tax credit for KiwiSaver, and a lower tax rate on savings vehicles. And it voted against sending legislation to a select committee to introduce a tax credit for research and development and lifting the cap on donations to charities.

“By voting against the Budget today National is voting against:

• Enhancing KiwiSaver to help more people save
• Business tax changes to improve productivity and competitiveness
• Electrification of Auckland rail
• Roading improvements
• Expanding industry training
• Improving health services
• Reducing class sizes
• Extra police

“It is not surprising National voted a cut in the company tax rate � that’s consistent as National never voted for the last cut to the company rate in 1988, also by a Labour government.

“It is also not surprising National voted against KiwiSaver. National MPs secretly think KiwiSaver is good, but can’t make up their minds.

“It should read the signs. The business community is coming strongly behind KiwiSaver. Just today Air New Zealand announced it is going to contribute 4% right from the beginning of KiwiSaver on 1 July.

“Now we know what National is against, what are they for? Borrowing to finance personal tax cuts. They would rather spend our way to prosperity and send the bill to our children. That really is voodoo economics.”