Charismatic

Got an e-mail saying:
I might rethink my KIWIsaver contributions if it's not tax efficient anymore, it already comes with hang-ups through having no direct control of your investment. What do you think?

BEVS

We decided not to bother with Kiwisaver in the end, even with the 'start-up' incentive. That's because government always seem to change the schemes , making them less attractive . These days, we prefer to be able to have much more say in what happens to any funds we may have salted away.

Expat Kiwi

Government pensions schemes are invariably for their benefit and not yours, there's nothing to stop them dipping-in when it suits them, or changing the rules in their favour when they've other things to pay for (earthquakes for instance)

BEVS

That's my feeling entirely. Seen it all before elsewhere. This one has been quick to change it's tune though. Not so much a gift - more a bond

Charismatic

But isn’t the KiwiSaver account with private companies rather than a good old fashion Ponzi scheme?

Charismatic

Surely worth a bit of opt in and out again for the first $1k added to your pension has to be worth it for filling in a few documents.

Thats the thing with the contributions as well, your employer will have to contribute 3%...and stuff. The rate of ROI in the first year is very high because of this and double for subsequent years...in effect...if ya see what I mean.

BEVS

I do. But. Husband opting in makes him more expensive to keep than another plumber not opting in... if you see what I mean.

Best not.

jmh

That was my thinking too. And my mum said it was a good idea.

chc4me

So if I put in 2% of my salary, my employer puts in 2% as well? Plus the govt adds another $512 at the end of the year? Hhhmmmm .....

I joined a Kiwisaver scheme that allows me to pick and choose the investments, not that the share market has helped my returns! But with what my employer has put in, the bonuses from the govt, I'm still way ahead.

Each to their own.

BEVS

Not really. Each to keep their own employment safe to be cost effective.
You , on the other hand , are self employed are you not.

Charismatic

...Oh! I didn't know you could do that, mine only lets me choose which rate they will devalue my investments at (i.e. to choose between funds). Who are you with can I ask?

Batty

Or, you put in 2% of your salary, your employer puts in 2% of your salary and you don't get a pay rise until such time as pay rises have risen above 2% so you are paying the employer's contribution as well as your own and you might in effect be paying 4% out of the same wage for years. Because that's the way it works with many companies, even though it's supposed to be not quite legal to do it.

chocolate cake

Yep, no doubt the incentives for Kiwisaver are being drastically reduced, 2 and 3 you mention were clear in the Govt's Budget Announcement earlier in the year the other was hidden in small print.

As the members tax credit from govt is annually based and runs to June 2012, it's effectively already been reduced.

That said I don't think there's any advantage from stopping contributions, or not joining if haven't already done. Unfortunately there's no orther tax efficient saving in NZ except for those owning 2nd and 3rd homes having no capital gains tax to pay.

Also it's private companies that run the schemes not the govt. You've choice where it goes.

Only disad is that you can't access the money til your 65', so the there's no incentive to put in more than to get to get tax credits and employer's contribution.

Re: pensions, the govt (& Labour the same) are being disingenuous in refusing to raise the pension age. It's bound to go up as the country can't afford it, Australian & practically all European govts have raised the age.

Charismatic

I'm not sure if the old codgers are up to working past 65, would companies be willing to drag on old paperweights on a few more years? It sounds good to say "Let's get another 3+ years out of people before they retire" but it seems unlikely they will be doing their best work, after all they entered the workforce in the early 1960's before men had went to the moon and while Kennedy was still president.

We don't have a compulsory retirement age anyway do we? Companies have to "restructure" people out of jobs instead.

jmh

I agree that the age probably will go up, but I'm not sure I think it is a good thing for the economy. We have high youth unemployment (as do many other countries right now) and increasing the retirement age will create a bottle neck at the top for jobs. Thus more young people on the dole with the attendant costs and social problems. Many people, like my mum at 71, love their jobs and plan to stay, but many others are counting down the hours to the day they can get their super.