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The big changes to Kiwisaver announced in last week's Budget make the new New Zealand super savings scheme more attractive than Australia's.
Finance Minister Michael Cullen announced on Thursday that, by 2012, employers will have to make a contribution of 4 per cent of an employee's salary to their Kiwisaver account, matching the worker's contribution of 4 per cent of earnings. In addition both parties will receive a tax rebate of up to $20 a week.
The total contributions make Kiwisaver, which launches on July 1, as attractive as the compulsory super scheme in Australia, requiring a 9 per cent contribution from bosses.
Kate McCarroll, a Kiwi electrical engineer working in Australia, would have been much better off under the Aussie super scheme before Thursday. But now she would do better here. In Australia, she would get $616,763 at age 65, including the $23,127 she's saved so far.
But in New Zealand, if she contributes 4 per cent of her salary she would get $663,827. If she contributed at 8 per cent, she would get $969,188.
The big difference is that in New Zealand, half of that money will come from her salary, in Australia those funds come out of her employer's pocket. McCarroll never notices the money she saves and didn't know how much she had until she looked into it for the Herald on Sunday. "A lot of people just aren't aware of their super. They don't click that it is real money," she said.
One dilemma McCarroll will face is that her savings in Australia can't be transferred to Kiwisaver if she returns home. She would have to start a new account here.
And not everyone is happy with Kiwisaver. Superannuation expert Michael Littlewood said: "It's a sad day for public policy. This has been forced on employers. Now you're going to have two different classes of employees - those who join and those who don't."
He said Kiwisaver won't help those on low incomes. In Australia, low-income earners are given savings assistance. "It doesn't address the problem of being unable to save at the bottom end. This has not really been thought through."
Also, he said, judging by the Aussie experience, it will take a long time for the effects to flow on.
"The average Australian household has only about 6 per cent of their assets in super.
"Despite the vast amount of money washing around it is only now just starting to touch households after nearly 20 years."
The Australian system is not without its critics. Jodi Preston, senior associate at Holding Redlich in Melbourne, said some believe 9 per cent was too little - especially as the pension was means-tested.
But Tony Hildyard, chief executive of Investment Business New Zealand, said Kiwisaver was "great news" for workers - especially the $40 to cover fees. "That might not sound much. But they've basically paid everyone's fee. And people will be able to actually retire rather than it being an unemployment benefit for old people."
McCarroll thinks everyone should be in her position and that Kiwisaver should be compulsory.
"I voted for [New Zealand First leader] Winston [Peters'] bill - it was one of the first things I voted for. It's just a safety net so people are protected for their retirement. No matter what your income is over a lifetime of working, it would still add up to a decent amount."
