ACT would stop taxing the investment earnings inside KiwiSaver accounts, leader David Seymour told the party’s election campaign launch in Auckland on Sunday, in a plan that would cost about $2.4 billion over four years and end the Government’s annual contribution for most working savers.
The pledge sets up a clear contrast with the two major parties five weeks out from the 7 November election. National and Labour have both promised to push more money into KiwiSaver by making contributions compulsory. ACT wants to leave joining voluntary but let the money grow untaxed.
“Other parties want to force your money into KiwiSaver, then tax you,” Mr Seymour said, RNZ reported. “ACT says it should be your choice, but if you save for the future we will let you get the full benefit of compounding returns instead of taxing you every step of the way.”
He framed the policy around the arithmetic of compound growth. “Interest on interest, year after year, grows your KiwiSaver balance exponentially,” he said, according to the Otago Daily Times. Mr Seymour told the launch that every dollar taken in tax on earnings also takes away all the future growth that dollar would have produced.
At present KiwiSaver funds pay tax on their returns each year. Most schemes are portfolio investment entities, where members are taxed at a prescribed investor rate of 10.5, 17.5 or 28 per cent depending on their income, while widely held superannuation funds pay 28 per cent, interest.co.nz noted. Under ACT’s plan those earnings would no longer be taxed at all.
To show what that could mean, ACT used the example of a 20-year-old builder on a $60,000 salary. The party says that worker would retire at 65 with an extra $209,486 in their account under its policy.
The trade-off is the Government contribution. Members aged 16 to 65 earning up to $180,000 can currently get up to $260.72 a year from the Crown if they put in at least $1,042.86 of their own money between 1 July and 30 June. ACT would scrap that payment for anyone who also receives employer contributions, replacing it with what the party described as “substantially greater tax relief” inside their accounts. People without an employer contributing, such as many self-employed savers, would appear to keep the Government top-up.
ACT’s own costings break the package into three parts over the four years from 2027/28 to 2030/31. Removing tax on KiwiSaver earnings would cost $4.082 billion. Extending the same treatment to other superannuation schemes outside KiwiSaver would cost a further $904 million. Ending the Government contribution for employed members would save $2.59 billion. That leaves a net cost of $2.396 billion, or roughly $600 million a year once the savings are counted, although the gross hit to the tax take is closer to $1 billion a year.
The party said “sensitive rules” would be put in place to protect the integrity of the tax system and make sure KiwiSaver stays a genuine retirement savings vehicle rather than a tax shelter. It has not yet released those rules, and said its fully costed fiscal plan would come later in the campaign.
Mr Seymour pitched the announcement as part of what he called a “productivity election”. He asked the crowd “Where does wealth come from?” and argued that a country builds wealth when more people own assets, hold savings and invest in productive enterprise, according to interest.co.nz.
The NZ Herald pointed out that because the policy removes tax on returns, its value grows with the size of a member’s balance. People with large KiwiSaver accounts would gain the most in dollar terms, while the $260.72 Government contribution is worth proportionally more to low earners and to people just starting to save. Mr Seymour said the change meant “more of your investment returns stay invested and more of your money is left to compound over your working life.”
The policy lands in an election campaign where retirement savings has become one of the main battlegrounds. National has promised to make KiwiSaver compulsory for people in work from 1 July 2028, with employee and employer contributions both rising to 6 per cent by 2032 and $1500 for every newborn to start an account, RNZ reported in September. Labour would instead make only the employer contribution compulsory, also lifting it to 6 per cent by 2032, while letting workers pause or reduce their own payments.
ACT’s approach goes in the opposite direction on compulsion. It would not force anyone to save, but would make saving inside KiwiSaver considerably more attractive than holding the same investments elsewhere. That raises the question of how the tax-free treatment would sit alongside ordinary managed funds and shares held outside retirement schemes, which would still be taxed. The “sensitive rules” the party has promised will need to deal with that gap.
The announcement follows ACT’s earlier pledge to make crypto profits tax free after a year, and fits the party’s long-standing preference for lower taxes and voluntary rather than compulsory saving. As a coalition partner since 2023, ACT would need to win support from National, and likely New Zealand First, to get the policy into a post-election agreement. National’s own plan relies on compulsion rather than tax relief, so any deal would involve negotiation over which approach wins out.
The two ideas are not necessarily incompatible. A future government could in theory require contributions and also cut the tax on earnings, although the combined cost would be considerably larger than either party’s proposal on its own.
For KiwiSaver members, the practical effect of the ACT plan would depend on balance size and income. Someone on a modest wage with a small account would lose up to $260.72 a year in Government contributions and gain a small amount in tax savings at first, with the benefit of tax-free growth building over decades. Someone with a large balance would be better off from the first year. Anyone wanting to understand how fees, contributions and returns already shape their balance can read our guide to growing your KiwiSaver faster.
If you are still deciding how to vote on 7 November, the NEWS WIRE voting tool compares where the parties stand on the issues that matter to you.
Would you swap the Government’s KiwiSaver contribution for tax-free earnings, or do you prefer National’s or Labour’s push toward compulsory saving? Tell us what you think in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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