News | Features
26 May 2020 2:24
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • Crime.co.nz
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    The Investor: Kiwisaver about to move into High Gear

    KiwiSaver – which has lurched around a few sharp bends in its short life – is about to shift up a gear. From April 1, the minimum employee and employer contributions will both rise from 2 to 3 per cent of pay.


    Employees will notice a drop in their take-home pay. But for someone on $30,000 it will be less than $6 a week, and for someone on $50,000 less than $10 a week, so most people will adjust pretty quickly.

    And they will welcome the rise in KiwiSaver money coming from the boss – after seeing employer contributions cut last April when they started to be taxed. For every employee, and especially those on lower incomes, their employer contributions will rise to a higher level than they were a year ago, before the tax started.

    For example, the employer of someone earning $30,000 contributed $600 a year before April 2012. Once taxation started, that fell to $537. From April 1 it will rise to $743 a year.

    For someone on $50,000, employer contributions dropped from $1000 to $825 last April, and will rise to $1238 this April. And for someone on $100,000, employer contributions dropped from $2000 to $1340 last April, and will rise to $2010 this April.

    Over the long term, the boosts in employee and employer contributions will make a big difference to people’s total retirement savings.

    Given all the changes, it’s probably a good time to review just why KiwiSaver is highly likely to beat any other investment. From 1 April 2013 onwards:

    • An employee earning $20,000 contributes $600 a year. The employer contributes $495 and the tax credit is $300. Total inputs are 2.3 times what the employee put in.

    • An employee on $60,000 contributes $1800, the employer $1,260, and the tax credit $521. Total inputs are just under double the employee contribution.

    • An employee on $100,000 contributes $3,000, the employer $2,010, and the tax credit $521. Total inputs are 1.8 times the employee contribution.

    • A self-employed person or other non-employee contributes $1,043 ($20 a week or $87 a month) to get the maximum tax credit of $521. Total inputs are 1.5 times the person’s contribution.

    If twice as much money goes into an investment, then the returns are twice as big, and the final total is twice the size.

    For someone who joins KiwiSaver in their 50s, this might mean retiring with $100,000 compared with $50,000 if they had saved elsewhere. For someone in their 20s, it might mean retiring with $1 million compared with half a million. Wow!

    One downside to the rise in employee and employer contributions is that people who haven’t joined KiwiSaver because they feel they can’t afford it will find it a bit harder to afford.

    It’s easy for others to say that 3 per cent of pay is not much. If you’re struggling to buy shoes for the kids, every dollar counts. But people who hesitantly join KiwiSaver often report that after a few weeks they get used to taking home a little less.

    The very people who don’t join KiwiSaver because of affordability are the ones who would most benefit from it. I urge you to try – knowing that employees commit to contributing for only a year, and you can pull out sooner if you get into financial strife.

    GOOD BYE

    This is my final column – after 16 years. A big thank you to all of you loyal readers, and particularly to those who have given me feedback over the years. Go well, everyone.

    © 2020 Mary Holm, NZCity


     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    RUGBY RUGBY
    The professional playing days of former Crusaders and All Blacks halfback Andy Ellis could be drawing to a close More...


    BUSINESS BUSINESS
    Air New Zealand has confirmed it will maintain a limited international network until the end of August More...



     Today's News

    Politics:
    Who is Dominic Cummings and why won't Boris Johnson sack him for flouting UK coronavirus lockdown rules 22:17

    Rugby League:
    The Warriors have poured cold water on the prospect of Russell Packer returning to the NRL club on loan 21:57

    Law and Order:
    A person has been critically injured in a workplace incident in Auckland 21:17

    Business:
    Air New Zealand has confirmed it will maintain a limited international network until the end of August 18:57

    Auckland:
    One person has been seriously injured after a vehicle crashed into a tree on Auckland's Great South Road - near Otahuhu 18:37

    Health & Safety:
    A telling off for a GP who sent a man home without examination ... only for him to die two days later 18:07

    Politics:
    A u-turn from one of the National Party's senior politicians 17:47

    Health & Safety:
    A self-employed midwife, a DHB and a paediatric registrar have been reprimanded over the care of a woman in labour - and of her newborn 17:27

    Law and Order:
    Christchurch police are trying to find Aranui man, William Schraa 16:57

    International:
    Prince William says parenthood brought back 'traumatic' memories of the death of his mother Diana 16:37


     News Search






    Power Search


    © 2020 New Zealand City Ltd