John MacDonald: We're not going far enough with superannuation changes

Quite a well-known chief executive and finance guy told me once that, in business, you should always make use of other people’s money first.

Which is exactly what the Government is doing with the KiwiSaver changes announced in yesterday’s budget.

It wants more of our money going in from our wages and salaries and less of its money going in through government contributions. Although, that’s our money too when it comes down to it.

But the gist is, the minimum contributions are going to increase from 3 percent to 4 percent and the bit the Government chips in each year is halving - from a maximum of $520 to a maximum of $260.

The change in what we pay-in to our KiwiSaver is going to be somewhat gradual. From April 1 next year, the rate will shift to 3.5 percent, before increasing again in April 2028 to 4 per cent.

But if you’re earning more than $180,000 a year, there’ll be some changes coming sooner. You’ll have no government money at all going into your KiwiSaver from July this year.

Which I think is great. Because why should someone earning that amount of money get a government hand-out? They shouldn’t.

Especially, when you consider that the finance minister made no noises yesterday about any longer term changes - such as the ones I always have and always will push for: means testing the state pension and increasing the age you can get it.

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Mornings podcast with John McDonald
from newstalk ZB.

Speaker 2 (00:13):
You know, quite a well known chief executive and finance guy.
He said to be one that in business is what
you should what you should do in business you should
always make use of other people's money first, which is
exactly what the government's doing with the key we saber
changes announced in yesterday's budget. It wants more of our

(00:34):
money going in from our wages and salaries unless of
its money going in through the government contributions. Although when
it comes down to it, that's our money as well,
isn't it. But the gist is the minimum contributions are
going to increase from three percent to four percent, and
the bit the government chips in each year is harving

(00:56):
from a maximum of five hundred and twenty bucks which
is what it is at the moment, to a maximum
of two hundred and sixty. But the government's going to
extend entitlement for that little boost and the employer contributions
to include sixteen and seventeen year olds as well, So
that's good news for them young young workers. Now the

(01:17):
change in what we pay into our kwisaver is going
to be somewhat gradual. From April one next year, the
rate will shift from three percent three and a half percent,
before increasing again in April twenty twenty eight to the
four percent. But if you're earning more than one hundred
and eighty thousand dollars a year, that might be you,

(01:39):
might not be you. There will be some changes coming sooner.
You will have no government money at all going into
your KIV saver from July this year, So that's just
a two months time, which I think is great because
why should someone earning that amount of money get a
government handout or the answer to that question is they shouldn't,
especially especially when you consider that the Finance Minister made

(02:03):
no noises yesterday than about any longer time changes such
as ones I always have and always will pushed for,
which are means testing the state pension and increasing the
age that you can get it. But with no talk
about either of those, I think the government should have
gone harder and faster with these contribution changes. And look,

(02:25):
I'm not the only one who thinks this. A guy
called Rupert Carlyon, he runs a key we save a
provider and he says four percent plus four percent, that's
the four percent from you, four percent from your employer.
He says, four percent plus four percent is better than
three percent plus three percent that we have now, but
nothing like the six percent plus six percent that have

(02:46):
got in Australia. And he says it's nowhere near the
fifteen percent average contribution rates in other OECD countries. So
he's saying this morning, quote, we have a long way
to go, but it's better than going nowhere. End of quote.
Now another provider, Dean Anderson, he says the finance ministers
should have stood up yesterday, and I agree with him.
It should have stood up yesterday and delivered an outline

(03:10):
of how New Zealand is going to follow Australia's lead
and increase contributions more than it did yesterday. As I say,
he will get no argument from me, because we need
to be way closer to the way they do things
in Australia with their retirement savings scheme. If there is
any hope in hell of keeping the state pension entitlement
anything close to sixty five, which I think is way

(03:31):
too low, the retirement age should be at least sixty seven.
And we also need to be way closer to the
way they do things in Australia, if we're going to
hold onto this pipe dream of keeping the pension a
universal benefit that every time Dick and Harry gets, whether
they need it or not, and before anyone gets too excited,
before you get too excited, yes, I know the consequences

(03:52):
of contributing more to Kiwi Saver. It means less money
in the pocket here and now, in the here and now,
which is why some people are warning us today that
the changes they're not great news for everybody. Retirement Commissioner
Jane Writeson, for example, she says low income earners, mildy
women and self employed will bet the hardest by the
lower government contributions. She says, quote, it's a shame there

(04:15):
are so few government incentives for a scheme that underpins
private saving for retirement and the Retirement Commissions. She would
like to have seen the government use the money it's
going to save from putting less in our accounts to
help these people out. But irrespective this is the thing,
irrespective of how we are affected by having to pay
more into our Chemisaver, and irrespective of how we are

(04:39):
affected by getting less contributions from the government, we need
to remind ourselves what saving is all about. It's about
denying ourselves in the here and now to benefit in
the future. That's what savings is. That's what it's all about.
And yes, we will all be affected by these changes
and outsats today to varying degrees, but what it comes
down to is that these changes are about denying ourselves

(05:03):
a little bit more than we do at the moment
so that we can have a little bit more in
the future. And what is so bad about that? Eh?

Speaker 1 (05:11):
For more from Category Mornings with John McDonald, listen live
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