Trying to have your cake and eat it too!

March 27th, 2013 at 10:00 am by David Farrar

blogs at Red Alert:

Next week thousands upon thousands of New Zealanders will wake up to a cut in their take-home pay because of policy decisions by the National/United Future government.

From 1 April 2013 the minimum KiwiSaver contribution is increasing from 2% to 3%, while the Student Loan compulsory repayment jumps a whopping 20% to 12 cents in every dollar earned over the repayment threshold.

Just a second. A Labour MP is complaining that contributions are going from 2% to 3%?

Under Labour the minimum contributions were 4%, and they complained bitterly when national reduced it to 2%.

Now Labour stands for a gradual move to universal, employment-based KiwiSaver contributions over time, because that will grow the economy and secure savers in retirement.

And while KiwiSaver is currently voluntary, meaning those who can’t afford a drop in the take home pay don’t have to join, Labour propose to make it compulsory to force every worked to take a drop in their take home pay (to use DC’s rhetoric).

There are valid arguments for and against compulsory KiwiSaver, but it is a bit rich to criticise a KiwiSaver contribution increase as being a cut to take home pay, when your policy is to make it compulsory!

But with unemployment today at record levels, and with so many families only just getting by, it’s crucial that changes which hit people in the pocket are well-signalled and well-understood before they take effect.

Umm, the policy was announced well over 12 months ago. And if you are unemployed you are not contributing a portion of your salary to KiwiSaver.

Unless Labour is proposing that KiwiSaver not just be made compulsory for employees, but also for beneficiaries?

Tags: ,

30 Responses to “Trying to have your cake and eat it too!”

  1. YesWeDid (1,048 comments) says:

    Of course the government now taxes kiwisaver contributions which means the 2% to 3% increase gets you back to a real contribution rate of 2% with a roughly 1% stealth tax take off.

    Vote: Thumb up 4 Thumb down 1 You need to be logged in to vote
  2. anonymouse (715 comments) says:

    “Under Labour the minimum contributions were 4%”

    That’s not strictly true David and you know it, Contributions began at 1% and *would* have risen annually by 1% to a 4% minimum by 2011, so contribution were never 4%, but they were capped at 2% due to the change in Government,

    yes Cunliffe is being duplicitous, but that is no reason to join him.l

    Vote: Thumb up 2 Thumb down 5 You need to be logged in to vote
  3. alloytoo (541 comments) says:

    DF wrote :”Unless Labour is proposing that KiwiSaver not just be made compulsory for employees, but also for beneficiaries?”

    An excellent notion.

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  4. WineOh (630 comments) says:

    @anonymouse I thought they were already at 4% before National reduced them to 2%.

    Personally, between my employer and I combining Kiwisaver and our subsidised staff super scheme I was salting away 12% of my income.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  5. mikemikemikemike (324 comments) says:

    ……. – I’m trying to get my head around the stupidity of labour……nope, I’ve got nothing /headdesk.

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  6. Manolo (13,746 comments) says:

    DPF, you should take Silent T to task on his infamous blog (I’m unable to, since I’m banned).

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  7. scrubone (3,099 comments) says:

    Na, this is nothing.

    I remember when Labour was running around shouting about sunlight being the best disinfectant while bashing the auditor general and solicitor general to try and cover up their theft of tax payers money.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  8. mikemikemikemike (324 comments) says:

    The reasons he states are so easy to take apart:

    How can they pay a mortgage? – If your income is so tight that a 2% increase is going to threaten your ability to pay then:

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  9. dave_c_ (219 comments) says:

    Typical bloody politicians and regulators
    This scheme is voluntary – full stop – In my view voluntary should not include compulsion (in terms of minimum contribution levels – I should be able to set the rate of contribution towards my voluntary savings) This is as bad as voluntary school fees contributions – voluntary in notion only, yet seemingly enforceable / recoverable by school administrators and governments who turn a blind eye to this form of teft/tax !

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. anonymouse (715 comments) says:

    @wineoh, Doh, my bad, yeah employees got stung at 4% to start with, but matching contribution from Firms started at 1% and then got capped,

    Although Cunliffe fails to mention that firms are also having to add 1% to their contribution, meaning that kiwisaver is a 6% scheme

    I’m in a private scheme so kiwiwaver didn’t really affect me when it got introduced

    Vote: Thumb up 4 Thumb down 1 You need to be logged in to vote
  11. mikemikemikemike (324 comments) says:

    The reasons he states are so easy to take apart:

    How can they pay a mortgage? – If your income is so tight that a 2% increase is going to threaten your ability to pay then:
    – You should opt out of Kiwisaver
    – You should look to sell your house or bring in a tenant who can assist
    – if you have a home you truly can’t afford to keep, get rid of it.

    Student Loans – going up to 12c in the dollar, yes it sucks. But you knew you had to pay it back when you got it.

    Buy a couple less coffees each week, there problem solved on affording increases. It’s simple logic, if you want to save money its usually at the expense of not spending it. So buying less lunches and coffee during the week = happier retirement.

    And lastly, maybe look at ways you can earn more so the above isn’t so much a problem. I have a good income, but my wife and I wanted more for our children so she made the tough decision to go back to work – it sucks but these are things you have to do if you want to get ahead.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  12. burt (8,269 comments) says:

    It’s not about what is sensible, real, good or bad. It’s about resonating sound bites to take into the election. This is the Labour party – the only thing they value is their own power and the power of their unions to extract money from low paid workers to pay for the advertising of highly paid politicians.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  13. dime (9,972 comments) says:

    struth, if 1% makes your mortgage unaffordable, get the hell out.

    a lesson a young Dime learned was when the bank says you are borderline, borrow less.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  14. RRM (9,917 comments) says:

    I’m gutted at having to pay back my interest-free student loan ever so slightly faster :-)

    (No, not really!)

    FFS he is talking like it was 10% or 20% or something that would actually start to cause a lot of hassles for people as they are forced to make big changes in a hurry.

    You guys can see why this leftist is just in complete despair at the NZ Labour party right? DPF is spot on. It’s enough to make you think about voting for the tories…

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  15. hubbers (139 comments) says:

    Standard opposition policy: complain about everything, assume the electorate are too dumb to realise you are full of shit.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  16. burt (8,269 comments) says:

    This is almost as funny as the “Axe the Tax” campaign… Labour vomiting on their own shoes about increasing GST or the 2008 election being about trusts.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  17. Paulus (2,626 comments) says:

    Labour —- Yawn

    Trying to get the media – well nothing appears to do so just talk crap, and the Auckland Herald will publish it as true.

    Vote: Thumb up 5 Thumb down 1 You need to be logged in to vote
  18. tvb (4,417 comments) says:

    The Labour Party just cannot get their narrative straight. And the forget their previous systems can be easily looked up. Making a comment against the Government seems to give them a short sugar fix until the next hypocritical statement.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  19. Pete George (23,559 comments) says:

    And if employees really can’t afford the increase from 2% to 3% they can have a payment holiday and reduce it to 0%.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  20. dave_c_ (219 comments) says:

    Watch out – The payment holiday could be the next thing to be axed – I see this mechanism being used to enforce longer term compulsion, and erosion of our own available choices.

    Vote: Thumb up 3 Thumb down 1 You need to be logged in to vote
  21. Grendel (1,002 comments) says:

    a payment holiday is really easy, once you have been a member for a year, its a simple form. and you can roll it over forever if you wish.

    most of my clients are reworking their budgets to allow for the extra 1% (even the poor sods on total rem, who have to cover both rises), as the extra 1% from the employer is worth it.

    it just a bit annoying that the 3% employer now means you actually get as much as you were getting a year ago, before National decided to tax the employer contribution.

    for some reason that change went under the radar but the drop in the ‘tax credit’ was big news. i know which is worth more in the long run for most people (not me, as i am self employed).

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  22. WineOh (630 comments) says:

    I am tired of all the tinkering around with Kiwisaver. Just decide on the long term viability of it, then leave it the hell alone for 10 years.

    Vote: Thumb up 3 Thumb down 0 You need to be logged in to vote
  23. dime (9,972 comments) says:

    RRM – every year you will get a little bit wealthier and little bit more pissed off with how the left think..

    i reckon youll be national by next election. lifetime member by 2020

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  24. s.russell (1,641 comments) says:

    “I’m trying to get my head around the stupidity of labour”

    Cunliffe knows that nobody in the mainstream media is likely to point out his hypocrisy, so he is really running little risk. He sounds good to the politically ignorant, and his fans (who don’t care if he is illogical), and the few people who will catch him out on places like Kiwiblog are all people whose minds are made up about Labour already.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  25. Manolo (13,746 comments) says:

    RRM – every year you will get a little bit wealthier and little bit more pissed off with how the left think.

    Nil, zero, fat chance. He’s a dyed-in-the-wool left-winger.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  26. RRM (9,917 comments) says:

    Smile, Manolo – it makes people wonder what you’ve been up to ;-)

    Anyone else and I’d suggest whistling a happy tune, but baby steps first eh?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. Manolo (13,746 comments) says:

    Comrade RRM, I shall heed your very wise advice. :D

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. OneTrack (3,089 comments) says:

    Next year hundreds of thousands upon hundreds of thousands of New Zealanders will wake up to a cut in their take-home pay because of policy decisions by the Labour/Green/Mana/NZ First government. PAYE hike, not to mention additional taxes such as hike in ETS at the pump or full-blown carbon tax.

    There, fixed it for you.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  29. ben (2,379 comments) says:

    But with unemployment today at record levels, and with so many families only just getting by, it’s crucial that changes which hit people in the pocket are well-signalled and well-understood before they take effect.

    Actually it was signalled in Budget 2011. Nearly two years ago. And there was a reminder last year. But whatever.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  30. kris (2 comments) says:

    “while the Student Loan compulsory repayment jumps a whopping 20% to 12 cents in every dollar earned over the repayment threshold.”

    The repayment threshold is around $19000/pa.
    To put this “whopping 20%” in perspective, consider the following scenarios for graduates:

    Graduate who earns <$19000/pa (<27 hours/week at minimum wage):
    Repayments/week before change: $0 (Income is under the repayment threshold)
    Repayments/week after change: $0

    Graduate who earns $28000/pa (40 hours/week at minimum wage):
    Repayments/week before change: $17.15
    Repayments/week after change: $20.58
    So an increase of $3.43/week, from an after tax income of $463/week (a reduction in net income of ~0.7%)

    Graduate who earns $56000/pa (40 hours/week at 2x the minimum wage):
    Repayments/week before change: $71.00
    Repayments/week after change: $85.20
    So an increase of $14.20/week, from an after tax income of $888/week (a reduction in net income of ~1.6%)

    The repayment increases are so "whopping" that the jobless/poor grads are unaffected, the min-wage grads will have to give up the occasional latte or a few Sky channels, and the more well-off grad might have to save ever so slightly longer for that new car or home loan deposit…

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote