Default KiwiSaver contributions are increasing to 3.5% and Christopher Luxon says if National is in government after the election he\u2019ll increase them to match Australia\u2019s 12% rate. But Nicola Russell says the comparison just doesn\u2019t add up.<\/p>\n
There are many reasons I moved to Sydney late last year \u2013 my son lives there, you can rely on public transport without losing your mind, and there are places open past 8pm on a Tuesday. Plus, I became a mum early, so I didn\u2019t do a classic Kiwi OE in my 20s.<\/p>\n
I didn\u2019t go to the \u201clucky country\u201d to make money. Sure, population size alone provides plenty of opportunity, but it wasn\u2019t the focus. Then I started looking at jobs, and something struck me as distinctly as the kookaburra\u2019s squawk \u2013 their superannuation would be a financial game changer for me. It\u2019s at least 12% and that\u2019s just the employer contribution. In comparison, New Zealand\u2019s sits at 3% each for the employer and employee, and will rise to 3.5% this April, then 4% in 2028.\u00a0<\/p>\n
When I saw National leader Christopher Luxon announce that if his party was re-elected Aotearoa would match Australia\u2019s 12% superannuation by 2032, my ears pricked up. Until I read the details.<\/p>\n
In Australia the employer\u2019s 12% is compulsory, and employees can choose to make a voluntary contribution on top of that. Under the National Party proposal, it\u2019s a very different scenario. By 2032, the employer will be mandated to pay up to 6% if \u2013 and only if \u2013 the employee pays 6%.\u00a0<\/p>\n
I just accepted a job \u2013 working at a university in Sydney. The employer super contribution is 17%, a significant consideration in taking the role (as was the 35-hour work week). For context, I\u2019ve been contributing to KiwiSaver for 16 years and haven\u2019t used any of it. If I stay in Australia for two years, the employer contribution alone will give me more than a third of what I had in New Zealand when I left. My superannuation percentage rate is more than five times the default rate in New Zealand, before I contribute a cent of my own money.\u00a0<\/p>\n
It\u2019s essentially a top-up of my salary, and enforced savings, and it has empowered me to take a new career direction, without worrying about climbing the salary ladder at every step. It\u2019s given me a taste of financial stability I didn\u2019t get in New Zealand.\u00a0<\/p>\n
Admittedly, my new employer\u2019s super contribution is generous, but even the base Australian rate of 12% is a very different proposition to New Zealand\u2019s rate \u2013 and I\u2019m not the only Kiwi gaping.\u00a0<\/p>\n
Christopher Luxon pitched his KiwiSaver policy as pushing rates up to match Australia\u2019s.<\/p>\n
I recently met a New Zealand woman, who has also just moved to Sydney. It\u2019s her second stint in Australia. She did 10 years in her 20s, where she says she built up $90,000 of super without even realising it. Now 47 and a senior retail professional, she has moved here with a focus on money. \u201cI have only been here a few months but the difference in salary plus super is huge,\u201d she says. \u201cI was feeling pretty stuck financially in NZ.\u201d\u00a0<\/p>\n
In New Zealand her super was about $660 a month (about $265 from her employer), now she gets $1800 super a month, from her employer alone.\u00a0<\/p>\n
The compulsion for the Australian employer to contribute is pivotal to the scheme\u2019s success across socio-economic groups. I\u2019ll top up my super, because I\u2019m on a decent income with no dependents, but for others on lower incomes, paying into super can mean digging into money for food or rent, so they just can\u2019t do it. In New Zealand, depending on the employer, that can mean people on lower incomes save nothing for retirement, while in Australia, the employer\u2019s contribution keeps adding up regardless.<\/p>\n
This doesn\u2019t do away with inequity, of course. Super is a percentage, not a universal income, so people on lower incomes clock up less super \u2013 but they still clock it up.<\/p>\n
It\u2019s a similar story with young people: they start saving for retirement earlier because their employer does it for them. My son, an artist in his 20s, would never have made contributions to a super fund in New Zealand. Instead, he\u2019d use the money to buy food, supplies for his next art commission, or let\u2019s face it \u2013 to go to the pub and have a few schooners with his mates. In Australia though, he already has super savings because his employer has paid in.\u00a0<\/p>\n
Don\u2019t forget pensions<\/p>\n
But you can\u2019t compare KiwiSaver to the Aussie scheme without comparing pensions: New Zealand superannuation is universal while Australia\u2019s pension is means-tested.\u00a0<\/p>\n
Indeed, one of the key reasons the Australian compulsory super guarantee scheme was developed was to reduce reliance on pensions. Its development, in 1992 by then-Prime Minister Paul Keating, was revolutionary. It was the first time any country had made employer-based, defined contributions compulsory for all workers.\u00a0<\/p>\n
Tax incentives for employers are core to the scheme. This works for the government because increased super means decreased reliance on means-tested pensions. Plus, of the AU$4 trillion that Australian workers have invested in super since 1992, about half has been invested back into Australia.<\/p>\n
There are also incentives for the employee. For instance, when I make a salary sacrifice to contribute to my super, it will be taxed at a concessional 15% rate, rather than the higher marginal tax rate. In New Zealand my super was taxed at 28%.\u00a0<\/p>\n
Long-term wins<\/p>\n
If Australians look to be winning while they work, do they lose when there\u2019s no guaranteed pension later in life?\u00a0<\/p>\n
Not only does New Zealand offer universal superannuation, the retirement age is 65. In Australia, means-tested pensions only begin at 67.\u00a0\u00a0<\/p>\n
New Zealand retirement commissioner Jane Wrightson has warned against thinking the grass is greener across the ditch. \u201cAustralia\u2019s greater reliance on private savings perpetuates inequalities from working years. The universal coverage of NZ Super enables New Zealand\u2019s system to deliver more equitable outcomes.\u201d\u00a0<\/p>\n
The question stalking New Zealand\u2019s finances, however, is how much longer the country can continue to offer universal super. When the New Zealand Treasury compared the cost of pensions<\/a> in Australia and New Zealand, it showed Australia\u2019s gradually trending down over several decades, and New Zealand\u2019s going up.\u00a0<\/p>\n Economist Sahmubeel Eaquab lays out the sobering reality: \u201cEssentially, New Zealand\u2019s fiscal position is very stuck. The way that our current collection of taxes and spending is designed, it requires about five working age people per retiree, but we only have four today, and in 50 years time we\u2019re going to have to find some ways to free up that money from those aging costs.\u201d<\/p>\n Eaquab wants to see the employer contribution in New Zealand become compulsory and raised gradually over time. If that doesn\u2019t happen, something else will need to \u2013 and politically, there\u2019s now the will. New Zealand First is the only other party that has announced its KiwiSaver proposal ahead of the 2026 election (they want to make KiwiSaver compulsory and raise the contribution), but the debate has well and truly kicked off<\/a> and there\u2019s a general consensus the current programme is unsustainable.<\/p>\n \u201cYou think about across the political parties, we now have all of them speaking about somehow strengthening KiwiSaver and, politically speaking, I think that is probably the most positive place you can be in an MMP regime. No one party needs to have the perfect solution. You just need a whole bunch of people who want to make incremental positive changes over time. And that probably fills me with more optimism than I have felt about KiwiSaver in a long time.\u201d<\/p>\n The future is change<\/p>\n It\u2019s unlikely I\u2019ll retire in Australia. I\u2019ve built a solid community at home, and I wonder if I\u2019ll ever get used to their bellowing birds, but here\u2019s what I do know for sure, the employer contribution in Australia, will make a much bigger difference to my bank balance than my super ever did in New Zealand \u2013 or would under National\u2019s proposed policy.<\/p>\n What I will come home to remains to be seen. Will the universal super remain? How much will KiwiSaver have morphed? Hats off to National for proposing something, but long term, I think we all know bolder change is needed.\u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Default KiwiSaver contributions are increasing to 3.5% and Christopher Luxon says if National is in government after the…\n","protected":false},"author":2,"featured_media":269237,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,85,46,7289,2101,545,266,267,238,3188],"class_list":{"0":"post-269236","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-il","11":"tag-israel","12":"tag-kiwisaver","13":"tag-money","14":"tag-opinion","15":"tag-personal-finance","16":"tag-personalfinance","17":"tag-politics","18":"tag-superannuation"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/269236","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=269236"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/269236\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/269237"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=269236"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=269236"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=269236"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Shamubeel Eaqub<\/p>\n