Home > Dollars & Sense, Social Issues, The Body Politic > Letter to the Editor: National squanders our super fund!

Letter to the Editor: National squanders our super fund!

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government urged to scrap tax on super fund - 13.12.13

Source

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FROM:     “f.macskasy”
SUBJECT: Letters to the editor
DATE:     Fri, 13 Dec 2013 13:46:03 +1300
TO:     Dominion Post <letters@dompost.co.nz>

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The Editor
Dominion Post

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The Commission for Financial Literacy and Retirement Income is calling for tax-free status for the NZ Superannuation Fund (aka “Cullen Fund”) set up by the previous Labour Government to fund baby boomer’ retirement.

Investment contributions were “suspended” by the incoming National Government in May 2009, costing us an estimated $40 billion in lost investment returns by 2040, according to investment analyst, Bernard Hickey.

Worse still, National has taken $3 billion in tax from the Superannuation Fund.

Government accounts have been in dire straits  since the 2009 and 2010 tax cuts, with at least $4 billion lost in revenue. This has forced National to borrow heavily from overseas and partial asset sales to fund the revenue short-fall.

All so the Nats could fund tax cuts (mostly for top income earners) we could ill afford.

Leeching $3 billion from the NZ Super Fund should be seen in the same light; scrambling by National to make up for the drop in tax revenue.

This is how National presents itself as a “prudent fiscal manager of the economy”; by making economic decisions for short-term benefit (for a select few) at the expense of long-term planning (for the majority).

As always, it will be up to our children to pay for this mess.

Frank Macskasy

(Address and phone number supplied)

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Previous related blogposts

National guts Kiwisaver

Authors of our own mis-fortune?

Regret at dumping compulsory super – only 37 years too late

References

Beehive: New Zealand Super Fund – fact sheet

Interest.co.nz: Bernard Hickey says the National Govt’s decision to suspend contributions to the NZ Super Fund will have cost about NZ$40 bln in lost investment returns by 2040

Radio NZ: Government urged to scrap tax on super fund

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  1. ravingwriting2go
    13 December 2013 at 7:27 pm

    The moment you stop monthly contributions, whether your account is active or not, the PIE tax eventually eats up and guts anyone’s Kiwisaver.

    Review any Kiwisaver scheme for committing to it, get legal advice either through your lawyer or through free advice at the citizens advice bureau (if you can’t afford a lawyer).

    Reason I say the above is many people have been caught out. Your Kiwisaver provider is not your friend, quite to the contrary – it works with the government to make it hard to access your account.

    There are several things you need to know, that the government and your provider will never tell you.
    1) The Kiwisaver account you open will be taxed at 17.5%+ which is an extra tax on top of what tax you still pay.
    2) Every month the government can apply a PIE tax, which for example could eat anywhere between a few dollars to thousands (depending on the size of your account).
    3) Kiwisaver is a tax cash cow, and basically this takes all the incentive to invest, when some banks could invest your money in non Kiwisaver schemes more cheaply.
    4) If you retire at say 55, you can’t access it easily. It is therefore not a ‘nest egg’ as such, as if you really need it you can’t touch it till you are 65.
    5) If you want to use it for medical treatment even for the likes of cancer, you will very likely be denied. Have a broken leg, prepare to walk a minefield just to get a cent. Kiwisaver is far worse than ACC policies.
    6) If you fall in hard times, the chances of you being able to access your Kiwisaver for ‘financial harship’ are as low as winning lotto, probably even lower. Banks have ‘discretion’, meaning that they are not required to release funds by law, so they virtually never do.
    7) Get legal advice through your lawyer or the citizens advice bureau, recommend the earlier. You are talking about a life long investment, seems worth the one off $50-$200 to learn your rights in the scheme.

    Kiwisaver is a mixed bag, buyer beware!

    • 13 December 2013 at 8:43 pm

      Excellent commentary, Ravingwriting2go. I can certainly confirm many of the points you’ve raised – especially #5 and #6.

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