Mary Holm: Silver rather than gold-plated, but still hard to beat

KiwiSaver changes make the plan silver plated rather than gold-plated. Photo / Thinkstock

The gainers from the proposed KiwiSaver changes in the Budget are those who don't belong to the scheme.

That's because the Government contributions are a transfer of wealth from all taxpayers to KiwiSaver members - and they are to almost halve.

However, KiwiSaver will still be hard to beat for long-term saving. It's merely moving from being gold-plated scheme to being a silver-plated one.

I expect participation will continue to grow, even if slightly more slowly.

Those who will lose most from the changes are self-employed and non-employee members, whose tax credits will be halved.

Employees' tax credits will also be slashed, and they will have to contribute more if they are currently putting in 2 per cent. But employer contributions will rise from 2 to 3 per cent.

And even though that money will be taxed from July 2012, it will still be somewhat more than now paid in - particularly for those on lower incomes.

Things get complicated, though, when we consider how employers might fund their higher contributions. If they reduce pay rises, that will in most cases affect both KiwiSaver and non-KiwiSaver employees.

Toss all the numbers in the air, and what lands first is lower costs for the Government. And, inthe current environment, that's the way it has to be.

I like the fact that New Zealanders will effectively vote on the KiwiSaver changes before they take effect. True, the tax credits are being lowered from this July, but that money won't be paid into accounts until after July 2012. There would be time for a different Government to reverse the change after the election.

If that happened, though, the new Government would probably come up with other KiwiSaver cuts. The current scheme is simply more generous than we can afford.