Australia v New Zealand: Super v Kiwisaver

I would like to continue my discussion on the after tax income differences between Australia and New Zealand by considering the effect of super / Kiwisaver. While my after tax income is the same as set out below, super and Kiwisaver do effect the money in my hand each month.

Now in Australia super is compulsory and is 9% of ordinary time earnings. In my case AU$7,200. This means after tax, student loan and super I will have AU$49,138 in the hand this year and have saved AU$7,200 towards my retirement.

In New Zealand it is a little more complicated as Kiwisaver is not compulsory. The best in the hand amount I could have had this year would have been the same as set out below... NZ$43,698.40 but with no savings toward retirement.

If I had joined Kiwisaver and contributed 4% I would have NZ$41,098.40 in the hand this year. I would have saved NZ$2,600 of my own money towards my retirement. With Kiwisaver mark 2, I also would have received the NZ$1,000 government kick start, NZ$1,042.86 in 'tax credits', NZ$40 in fee contributions and, assuming the year begins from today (1 April) when employer contributions of 1% kick in, NZ$650 from my employer. My total retirement savings would have been NZ$5,332.86.

So, ignoring currency factors, worst case I am only $5,239.60 better off in the hand this year in Australia (although $7,200 better off in saving for my retirement).

If I was in Kiwisaver in New Zealand I am $8,039.60 better off in the hand and $1,867.14 (remember I am including the once off NZ$1,000 kick start in Kiwisaver) better off in saving for my retirement this year by being in Australia, and this is with the millions, if not billions the NZ Government is pouring in Kiwisaver (most likely from all the extra tax they have been taking over the year).

Now of course I have only examined my position this year and as Kiwisaver is taking a few years to come in fully the figures will change (mostly due to employer contributions under Kiwisaver increasing to 4% over the next few years). I think the dramatic point though is that in Australia I remain better off in the hand and in retirement without the government handouts and employer contributions that New Zealand has.

6/4/08: I have corrected an error I made in this post. I had not deducted the base 1.5% medicare levy that applies to everybody - therefore my Australian income is $1200 lower, but still much better then in NZ.