It must be election time what with all the discussion that is happening over Kiwisaver at the moment.  Each party says they know best but in my view, the best and easiest thing that they could all do to Kiwisaver, is make the Employer’s Contributions tax-free again.

Currently the Employer’s Contributions are taxed at the employee’s marginal tax rate (reviewed once a year) which ranges from 10.5% to 33%, called ESCT.  I know this is seen by the IRD as a Fringe Benefit but if the funds are locked in until you are 65 then what a great incentive it would be for people to save rather than spend.

Employees could also increase their savings by foregoing part of their Gross Salary and payining it into their Kiwisaver scheme, called Salary Sacrifice.

We have all been told to save more but what a dis-incentive it is that we are taxed on the employer’s contributions.  Funny though that MPs employer’s super contributions are tax free.

KiwiSaver investors face continued political risk, with the major parties unable to agree on the future of the scheme.

The divisions over KiwiSaver and New Zealand  Superannuation were highlighted at a retirement policy debate in Auckland today, hosted by managed funds group the Financial Services Council (FSC).

 The debate featured speakers from National, Labour, the Greens, UnitedFuture, ACT, the Maori Party, Internet-Mana and the Conservatives. They outlined their parties’ policies on KiwiSaver, New Zealand Superannuation and related issues.

 Milford Asset Management managing director Anthony Quirk asked whether they could come to an accord on KiwiSaver to provide certainty for investors and prevent the scheme becoming a “political football”.

Labour finance spokesman David Parker said the fact that the major parties even agreed there should be KiwiSaver was an improvement, with National opposing the scheme when it was created.  Read the full article at Stuff.co.nz.