If National wins ...

[Bjauck]

If not put into kiwisaver the funds would either be earning in another way such as bank interest, or would be spent, generating GST. Any effect would be minimal.

If not put into Kiwisaver, I suspect many of the funds would have ended up going towards a deposit for investor or owner occupied housing. The tax settings for financial investments vis a vis both investor and owner occupied housing being what they are.

As it is, there is not much incentive to contribute annually to Kiwisaver more than the minimum necessary to get the annual tax credit - especially for the self-employed. Even then, the current National Government $512 annual tax credit reduces as an incentive when the balance grows to over about $30,000.

[777]

In the interests of accuracy, not normally evident on this thread, the tax credit is $521.43/ year.

It is money given to you so always an incentive irrespective of your account balance.

[Bjauck]

In the interests of accuracy, not normally evident on this thread, the tax credit is $521.43/ year.

It is money given to you so always an incentive irrespective of your account balance.

Apologies for the transposition. The money is not given to you but is a credit to your Kiwisaver account, with all the inherent restrictions on its use. The credit is dependent on the amount deposited to your Kiwisaver account during the previous year. Employer contributions are excluded.

For annual deposits exceeding $1,042.86 the kiwsaver member receives a credit of $521.43. So for those on high incomes there is little incentive to pay more than $1042.86 into their account. So many of those wealthier members probably still end up buying housing as the most tax efficient way to build up assets for their old age.

For balances on over say $30,000 that may earn say about 6% income during the year, the incentive to keep on contributing is minimal despite the "lure" of the annual tax credit. Why? 6% of $30,000 is $1800. 28% pie tax comes to $504. So the annual credit is equivalent to the PIE tax at that level.

On average, Kiwsaver balances over $30,000 would have PIE tax at more than the level of the annual maximum tax credit. I think that the incentive to direct money into building up kiwisaver balances over $30,000 would be minimal as opposed to building up investments which enjoy greater tax efficiency such as owner-occupied and investor housing.

Disc: DYOR. Do not rely on the accuracies of the figures!

[huxley]

"For balances on over say $30,000 that may earn say about 6% income during the year, the incentive to keep on contributing is minimal despite the "lure" of the annual tax credit. Why? 6% of $30,000 is $1800. 28% pie tax comes to $504. So the annual credit is equivalent to the PIE tax at that level. "

Good post, but this example is a bit unrealistic since your 6%pa will include both taxable and non taxable Investment earnings for the purposes of PIE tax.

[Bjauck]

...
Good post, but this example is a bit unrealistic since your 6%pa will include both taxable and non taxable Investment earnings for the purposes of PIE tax.

True...I guess most of the earnings for the more conservative funds would be taxable...but their returns would be smaller too - more like 3% pa. So perhaps the incentive to keep on adding to the Kiwisaver account drops off more when the balance hits circa $60,000 as opposed to $30,000.

Another factor to consider is the fact that kiwisaver funds are - by and large - locked in until retirement age whereas tax efficient housing can be bought, sold and mortgaged before retirement. This further reduces the comparative appeal of building up a large Kiwisaver balance.

[elZorro]

Chinks are showing in National's armour ahead of the elections.

The other day we had MP Alfred Ngaro blurring the line between party politics and governing, and he was pulled up for it. Luckily for him, he's been in the job for several months and the number of big decisions he's made is.. zero.

http://www.newshub.co.nz/home/politi...rain-fart.html

Now with outspoken stalwart Mike King pulling out of a suicide prevention advisory board, the govt looks to be doing a poor job in another area.

http://www.nzherald.co.nz/nz/news/ar...ectid=11856284

There was a clear discussed target of 20% reduction in suicides within 10 years (in line with WHO), but it was cut from the plan at the last stage. He's right to be furious about that. He had some choice words for the situation.

[Bjauck]

...
Another factor to consider is the fact that kiwisaver funds are - by and large - locked in until retirement age whereas tax efficient housing can be bought, sold and mortgaged before retirement. This further reduces the comparative appeal of building up a large Kiwisaver balance.

It would be great if the next National Government strengthened and boosted the appeal of kiwisaver but history has shown National has been against any widespread pension scheme. The latest Government reducing the credits - so that wealthier Kiwis continue to rely on tax efficient residential housing. Poorer kiwis, who can no longer rely on housing-as-pension investment are even allowed to raid their kiwisaver for hardship claims (which could occur more often as state welfare is put under further pressure.)

When you consider credit of $521.43 on the $1,042.86 contributed by a taxpayer out of their tax paid income to their kiwsaver fund, it only returns to the kiwsaver account, the amount of tax already paid (if the taxpayer was on the top rate) Unlike the pension schemes in other countries, the income earned by the Kiwisaver balance is subject to tax. So Kiwisaver is still at a disadvantage in that respect when compared to the tax efficiency of investing in housing. Real estate investment is increasingly available for only the wealthier taxpayers.

"But scratch the surface and there are some significant concerns and issues that need to be addressed to really get KiwiSaver delivering to its true potential."
http://www.nzherald.co.nz/personal-f...ectid=11856222

[Major von Tempsky]

As somebody said above "There are heaps of unemployed NZ singers. "
And also poets, painters, children's story writers, authors, film makers, would be politicians....

And why are they unemployed? Because, as a moderate statement, they are no damn good!

I have always been fascinated by the number of people who say that when they retire they are going to write children's stories! Usually they come from a totally unrelated field and have no obvious talent nor any clamouring fans. Quite often they demand government and local government and community support.

I have 3 daughters and luckily none have married an unemployed poet, I think I would have jumped off the Kelburn Viaduct if they had. I remember everyone's total confusion and shame when a quite attractive woman at church with 2 very attractive daughters left her very competent and successful husband to go and live with an unemployed poet. Wonder how long it lasted....

[Bjauck]

As somebody said above "There are heaps of unemployed NZ singers. "
And also poets, painters, children's story writers, authors, film makers, would be politicians....

Any stats on the former jobs of those who are currently unemployed?

And why are they unemployed? Because, as a moderate statement, they are no damn good!

Maybe its because those lucky people who have sufficient available cash after paying living and accommodation costs (there must still be some?) end up investing in more land and houses instead of buying the GST incurring products of the artists....If National introduced meaningful policies to improve housing affordability, then maybe people will have more money to spend on arts.

I have always been fascinated by the number of people who say that when they retire they are going to write children's stories! Usually they come from a totally unrelated field and have no obvious talent nor any clamouring fans. Quite often they demand government and local government and community support.

How much do retired yet aspiring writers receive from the government and councils? Charities currently struggle to raise funds in today's environment.

I have 3 daughters and luckily none have married an unemployed poet, I think I would have jumped off the Kelburn Viaduct if they had.

Sounds drastic if one of your daughter's had met her true love, who happened to be an unemployed poet.

I remember everyone's total confusion and shame when a quite attractive woman at church with 2 very attractive daughters left her very competent and successful husband to go and live with an unemployed poet. Wonder how long it lasted....

Who know what happens behind another family's closed doors. Maybe the "competent and successful" husband or the "quite attractive" wife had inter-personal relationship failings. Maybe the "very attractive" daughters were difficult to raise.

[stoploss]

Hasn't taken Phil Goff too long to change his tune .... ????

http://www.nzherald.co.nz/nz/news/ar...ectid=10767110

http://www.nzherald.co.nz/business/n...ectid=11857134