Kiwisaver is a "no brainer" - as long as governments will leave it alone.
It is good because the Government puts in $1000 when you start.
It is good because the Government contributes $10 a week as long as you put in $20 a week or more.
It is good because your employer has to put in the same amount as you.
The $10 a week is still good for those self-employed.
The $10 a week is also good for people who are not working (e.g. at-home mothers).
IT'S GOOD AS LONG AS THE POLITICIANS LEAVE IT ALONE
When KiwiSaver started out, the Government would contribute $20 a week as long as you put in $20 a week.
When National got elected in 2008, they promptly cut the government contribution from $20 a week to $10 a week, citing difficult economic conditions.
To be fair, that was in the middle of the Global Financial Crisis and things were indeed tough.
But will we ever get a retirement scheme that future governments leave alone?
That's what we all want, so we can have confidence in our retirement plan.
KIWISAVER IS A NO-BRAINER
You need the Government to leave it alone.
Tell your MP in no uncertain terms to leave it alone.
You are taxed three times on your KiwiSaver.
You pay tax on the money before you put it into your KiwiSaver.
The investment earnings are then taxed. Then when you retire, and invest the money from your KiwiSaver into income-producing funds, you will be taxed again.
THE GOVERNMENT WILL EVENTUALLY MAKE A LOT OF MONEY FROM YOUR KIWISAVER
The Government put in an initial $1000 plus they contribute $10 a week or $520 per annum, but then they tax the investment earnings.
WHAT'S THE DIFFERENCE - TAX AT 17.5 PER CENT?
Example: A KiwiSaver with total contributions of $500 per month x 25 years.
At a 6 per cent gross return (no tax), it will grow to $349,000.
Taxed at 17.5 per cent it will grow to $298,000.
In this example the Government will have "contributed" $13,500 and taken back over $50,000.
WHAT'S THE DIFFERENCE - TAX AT 28 PER CENT?
Example: A KiwiSaver's total contributions of $500 per month x 25 years.
At a 6 per cent gross return (no tax) it will grow to $349,000.
Taxed at 28 per cent , it will grow to $272,000.
In this example the Government will have "contributed" $13,500 and taken back over $77,000.
IN TIME, IT'S A HUGE MONEY SPINNER FOR THE GOVERNMENT COFFERS
Once a few million people get into KiwiSaver and their accounts really start to grow, the Government will be making - no, taking - heaps more in tax revenue.
In the US, people form lobby groups and hassle politicians on issues that they want fixed or changed.
In New Zealand we don't lobby them, but we should.
Most countries offer some savers some tax incentives
Many Western countries have tax-advantaged superannuation schemes.
LOBBY, LOBBY, LOBBY
Before the election, send your MP or favoured election candidate an email, and tell him/her that if they want your vote:
• They need to promise to leave KiwiSaver alone (or improve it).
• They need to promise to look into reducing the internal taxes on KiwiSaver.
Alan Clarke is a financial and retirement adviser and author. His second book, The Great NZ Work, Money & Retirement Puzzle is available at www.acfs.co.nz Alan is an independent authorised financial adviser (AFA) FSP26532; his disclosure statement is available on request and free of charge.