KiwiSaver most benefits the rich

Waikato University (yeah I know, try not to laugh) has done research that shows KiwiSaver will increase income inequality and most benefit the rich.

Now this is true.  Take for example a property investor whose company makes many millions per year.   He has a choice of paying the profits to himself as dividends or as salary (or a mixture of both). With inputted dividends it works out much the same eventually.

Now with KiwiSaver he has a real incentive to pay himself more in salary, due to the tax deductibility of the employer contribution.

You see if he pays himself $1 million a year, then he will put in $40,000 a year as the employer contribution.  Now normally that would attract 39% tax, which would be $15,600.  The millionaire has effectively just made $15,600 through reduced tax, thanks to KiwiSaver.  They also get the $2,040 of government subsidies also.

So Dr Cullen has given CEOs who earn $1 million a year a $17,640 tax reduction.  People should remember this if he ever attacks actual tax cuts as favouring the rich.

Now I actually support KiwiSaver. because it has many positive benefits.  But it is undeniable it helps the rich by far the most.  And they will be the ones that are already saving, so it may not increase the levels of savings but just restructure their current savings to take advantage of the tax credits and deductions.