Budget 2010: Tax rewards for savers serious about future

File photo / The Aucklander

People who choose to save will get more bang for their buck under new incentives announced by the Government.

From October 1 the top tax rate on KiwiSaver will drop from 30 per cent to 28 per cent and those who pay lower tax on KiwiSaver will also have their rates aligned to new personal tax rates.

The changes will benefit the more than 1.4 million people who have signed up to KiwiSaver since it was launched in July 2007.

People will also pay less tax on their other savings from October including cash PIEs (portfolio investment entities).

Tax rates for other superannuation funds and unit trusts will be dropped from 30 per cent to 28 per cent from April next year.

Mr English said the savings tax changes and GST changes were designed to encourage people to move away from consumption towards saving.

As a result of the lower tax rate a worker earning $48,000 a year who joins KiwiSaver at 25 would be over $11,700 better off upon reaching the retirement age of 65, he said.

Vance Arkinstall, chief executive of industry body the Investment Savings and Insurance Association said the changes sent a strong signal to the public.

"It demonstrates Government is serious about increasing New Zealanders level of saving."

Retirement Commissioner Diana Crossan said the Budget presented the most changes for the ordinary citizen seen in a while.

"It means people have to have a good look not just rush off and spend the extra increase in the pocket."

Investment writer Mary Holm said anyone not in KiwiSaver should take a look at how much they would be getting through tax cuts and consider joining before they got used to the extra money.