ACT pledges tax-free KiwiSaver earnings, with trade-off on top-up
ACT would remove tax on KiwiSaver earnings if it is elected. Leader David Seymour announced the policy at the party's campaign launch in Auckland on Sunday, 4 October, according to RNZ.
Seymour said the change would leave investment returns in the fund to keep growing for generations. He pointed to compound interest, where interest earns more interest and balances build faster over time. Taxing those earnings each year, he said, takes away not only that money but all the future growth it would have created.
He described the policy as a matter of choice. Seymour said other parties want to force people's money into KiwiSaver and then tax it. He said ACT wants KiwiSaver to be voluntary, with savers keeping the full compounding benefit without tax at each step.
ACT gave a single saver as an example. Seymour said a 20-year-old builder on a $60,000 salary would have an extra $209,486 by age 65 under the policy.
The pledge comes with a trade. ACT would end the annual KiwiSaver government contribution for members who receive employer contributions and replace it with the tax relief. The party estimates the plan would cost about $2.4 billion over four years, after counting the saving from ending that contribution. It said its fully costed fiscal plan will be released later in the election campaign.
The broader context here is fiscal credibility and timing. A $2.4 billion figure over four years is clear enough to invite questions, but the offset is only partly set out. Ending the government contribution for those with employer contributions lowers the gross cost. The net amount must still be found elsewhere. Until the fiscal plan is released, Press Gallery attention will stay on that gap.
In my view, the political design is as deliberate as the economics. The trade is direct. Savers keep investment earnings untaxed. The state steps back from the annual top-up for employed members. That sharpens ACT's difference on compulsion and the role of the state in retirement saving, and it gives the party a clear line to hold on the campaign trail.
Looking at what this means for the weeks ahead, the questions are predictable and hard. How the tax relief would be put into law, how Inland Revenue and providers would run it, and how the gain is shared across income levels and saving histories will be tested. The builder example does not answer that. It is an illustration, not a full breakdown. The fiscal plan will need to carry that weight.
