KiwiSaver

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.”

Finance Minister Michael Cullen said Opposition leader John Key has deliberately exaggerated the net cost to employers of KiwiSaver.”In Parliament today he did a back-of-the-envelope calculation offsetting the benefit of the business tax package that is simply incorrect,” said Cullen.

“He has ignored the employer tax credit and used the wrong basis for his claims – 2 million workers, when there are 1.346 million equivalent full time workers. He has also failed to take into account the fact that employers will be able to offset their compulsory contributions against wage/salary negotiations.

“The net annual cost of the employer contribution after full implementation is $1.346 billion (cost of the employer contribution) minus $674 million (the credit offsetting the employer contribution) which equals $672 million.

“If there is a 0.5% moderation in total wage growth over the next four years in total, it would reduce the net cost to just over $300 million.

“What he has done is he has exaggerated the cost of KiwiSaver and ignored the change in incentives towards saving and investing that will bring wider advantages to the New Zealand economy as outlined by NZX.

“NZX CEO Mark Weldon said ‘the matching tax credits for employer contributions will give businesses a competitive edge in attracting and retaining high value employees.

‘There’s no doubt we’re swimming in a global talent pool. Now employers will be able to contribute to their employees’ savings in a low-cost, tax-efficient way, adding a degree of flexibility to structuring pay packages that will help them attract and keep the best people.'”

“What Key did in the House today was ripping up his speech as he went along because that is exactly what it was, rubbish.”

The Retirement Commissioner says the Government’s planned additions to
the KiwiSaver scheme now make joining more worthwhile.The Commissioner, Diana Crossan, says Budget announcements of compulsory
employer contributions and tax credits of $20 a week mean people need to
spend time working out the status of their personal finances before they
make decisions about joining KiwiSaver.

“Budget announcements may make KiwiSaver more attractive,” says Crossan. “Experts will say it is an easier decision, but people will
need to make well informed decisions themselves, based on their
particular financial situation.

Crossan says people will definitely need to use the Retirement
Commission’s new online financial check up – Sort Me. Sort Me helps
people work out how financially sorted they are. It’s the first step to
understanding whether KiwiSaver’s right for them.

Crossan said workplace savings schemes were proven to be the easier
way of saving, and to attract people, the schemes needed to be as simple
as possible.

“Many people have a large mental hurdle which can stop them signing up
to long term savings. The kick start cash incentive and automatic opt in
to KiwiSaver may help people over that hurdle.

“The new announcements certainly make KiwiSaver more attractive, but
it’s important for people to have a good grasp of their financial
priorities.

“KiwiSaver gives all New Zealanders a trigger to think seriously about
their money situation. Whatever your age or stage putting off important
financial decisions is not the way to go – whether it be a decision to
pay off debt or to plan for retirement,” she says.

“One thing’s for sure, most people need to prepare financially for
retirement if they want more income than is provided by New Zealand
Superannuation – which currently after tax is approximately $14,407 if
you’re single and living alone or $22,164 if you’re a couple,” says
Crossan.