Election 2026: Act announces multibillion-dollar KiwiSaver tax cut, to remove Government contribution

The Act Party is proposing a multibillion-dollar tax cut for New Zealanders’ KiwiSaver accounts by abolishing the tax paid on investment earnings made through KiwiSaver and other superannuation accounts.But there’s a catch: Act would also remove the Government contribution (up to $260.72 a year) for KiwiSaver members receiving employer contributions.The announcement is being made this afternoon in Auckland and is being livestreamed at the top of this file.The party says the tax relief created by abolishing the tax on earnings would be more substantial than what was provided through the Government contribution.Act’s costings show the amount of revenue the Government would forgo by removing the tax is expected to increase annually.The lost revenue is larger than what Act expects to save by removing the Government contribution.That suggests the total value of the tax relief is greater than what would be otherwise given to New Zealanders via the contribution.However, the tax relief wouldn’t be spread evenly.Act has made a KiwiSaver announcement this afternoon. (Image: DepositPhotos)The party’s policy document doesn’t include calculations for what the average benefit per KiwiSaver account may be from this change.As the investment earnings generated may fluctuate year-to-year, the amount received by abolishing the tax will also differ annually.The policy change is likely to benefit those with larger KiwiSaver balances more as they are investing more money and therefore have greater potential for larger returns.Announcing the policy at Act’s election campaign launch today in Auckland, leader David Seymour said the proposed changes would mean “more of your investment returns stay invested and more of your money is left to compound over your working life”.He contrasted Act’s policies with those of other parties – such as his coalition partner National – which have proposed a form of compulsory KiwiSaver.“We don’t support compulsion, but we want to offer a sweetener to KiwiSavers,” Seymour said.“People should be encouraged to build savings of their own so they can live a comfortable life in retirement. But the tax system currently works against them.“The Government taxes your KiwiSaver investment earnings year after year, for as long as you save.“The result is less money compounding over a working life. The reduction in retirement savings from that tax on compounding interest is staggering.”Act provided case studies showing its calculation for what its policy could mean for different people.For example, according to Act, a 20-year-old builder earning $60,000 would have an additional $209,486 in their KiwiSaver by the time they reach age 65. A 50-year-old office manager earning $80,000 would have an additional $20,878.These calculations assume the individual currently has the average KiwiSaver balance for their age and are based on Act’s assumptions about investment returns and contributions.The flipside to the policy, however, is that Act would remove the KiwiSaver Government contribution for members who receive contributions from their employer.The party says this is replaced with “substantially greater tax relief inside their KiwiSaver account”.“The Government currently taxes money growing inside KiwiSaver, then gives some savers a small annual Government Contribution back,” an Act policy document says.“The only real winner from this money-go-round is the bureaucracy that clips the ticket along the way. [Act] would rather stop taking the money in the first place.”Over the four-year forecast period, Act says the KiwiSaver change would mean reduced Government revenue of just under $4.1 billion and the change for other superannuation accounts would be about $900 million.This is partly offset by savings by removing the Government contribution (worth about $2.6b over four years), meaning Act’s overall policy costs about $2.4b.It’s promising to explain how it will fund this in its alternative Budget, set to be released shortly.However, there was a sneak peek at this Budget during Seymour’s campaign launch speech today, with the party leader saying it would show how Act will cut Government revenue by $1b.Both National and Labour are proposing a form of compulsory KiwiSaver at this year’s election.National’s policy would make it compulsory for workers while lifting the default contribution rates over time to 6% for both employees and employers.It’s also wanting to introduce other bonuses, like a kickstart for babies and more help for workers on paid parental leave.Labour’s focus is on lifting employer contributions to 6%, while giving employees more flexibility about their rate. Employers would be required to pay at 6% regardless of what rate the worker was paying under Labour’s policy.