Richard Prebble
Columnist, former cabinet minister and ACT Party leader.
Opening ACT’s election campaign, David Seymour made the most consequential policy pledge of the election.
All the other parties are proposing, in one form or another, to make KiwiSaver compulsory.
National proposes compulsory KiwiSaver, eventually taking 12 per cent of remuneration – six per cent from the employee and six per cent from the employer.
ACT is promising to keep KiwiSaver voluntary but make its investment earnings tax free.
Seymour gave the example of a 25-year-old nurse earning $100,000.
National’s answer to providing her with an adequate retirement income is to make her save more.
ACT’s answer is to stop taxing her KiwiSaver earnings.
Seymour calculates that, on existing settings, making her KiwiSaver earnings tax free would leave our nurse with an extra $217,366 at age 65.
As the employer contribution ultimately comes out of our nurse’s total remuneration, at eight per cent rather than 12 per cent, over her working life she would take home well over $100,000 more.
Seymour has a policy that will not just appeal to the employed.
I am over 65. As I am now retired, I could not recover from a serious investment loss. I need a reasonable return from a conservative investment.
Unlike our nurse, I can put money into KiwiSaver and take it out again.
If KiwiSaver earnings are tax free, why would I leave long-term savings in a bank deposit where the interest is taxed rather than put them in a tax-free KiwiSaver fund?
Seymour may have devised the policy as an alternative to compulsory saving, but I think he has a winner for the retired.
I suspect he has also made taxing interest on bank savings – a hated tax – unsustainable.
Is making KiwiSaver earnings tax free the election game changer?
This article was originally published by I’ve Been Thinking.
