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Thanks for your email. As a starting point, I would suggest you review some of the other Q&As in this thread as some of the general information about how to choose a provider and what kind of fund is appropriate has been answered.

Your next point of call, if you haven't already been there, should be the KiwiSaver calculator on Sorted's website. Why? This will give you a fair approximation of how much you can expect to earn through KiwiSaver should you and your wife decide to become members. 

As I did not have your particular details,  i.e.how much you and your wife earn, and your likely contribution rates I could only guess what you could stand to earn from now until retirement.

The calculator is adjustable but based on current Stats NZ data tags your life expectancy at 87 (as a man) and 90 as a woman. It also breaks down what your accumulated savings after 65 would deliver on a weekly basis (inflation adjusted) until death. Note the assumptions that went into these computations. I've reproduced them at the end of this story.

With only the $1,000 kick-start, and the member tax credits, on a salary of $30,000, assuming contributions by your wife and her employer of 3% (which becomes the legal minimum in April 2013), your partner could expect to build up a $17,026 nest egg by the time she reaches 65, delivering an extra $20 a week as a supplement your other retirement income (private savings and the New Zealand Superannuation).

In case you didn't already know the payment rate (as outlined on the Work and Income website) is $536.80 per fortnight for a couple, married or living in a defacto relationship.

As you are contemplating downsizing your home, you may wish to adjust the numbers in the KiwiSaver calculator to see what effect a lump sum payment could have on your savings over the years.

In terms of which provider to choose, there are a range of considerations including but not restricted to performance, fees, communication, track record and consistency. Because there are so many providers to choose from it can be daunting making a selection. Just remember that choosing one doesn't necessarily bind you to them forever. You can change providers and even funds although the cost to do so can be variable. That's another thing to check before you sign on the dotted line.

With respect to fund type, the general rule is that the closer you are to retirement age, the more conservative your investment portfolio should be. That's to reduce the risk of unexpected market shocks decimating your wealth when you need access to it most. That said, if you're not planning on accessing that money immediately upon turning 65 (subject to certain terms and conditions you have the choice of staying invested in some cases) it's possible you might want to be invested in a fund more heavily invested in equities. This has to do with longevity. If we really do live as long as the forecasts suggest, we'll want our investments to keep ticking along and producing retirement income for 20 odd years. Ask yourself when you want access to that money, what your long(er) term plan is and how much you think you'll need to live off in retirement.

While we can expect to spend less the older we get, health risks and costs grow exponentially. Price out some health care policies for 65 and beyond and you're bound to get a jolt. So even though you might think you can live large off $30k a year, you might want to provision for more or at least have a comfortable savings cushion to draw on as an emergency.

An authorised financial advisor familiar with all the KiwiSaver products on the market should be able to give you some guidance on the better ones out there and also how KiwiSaver itself can fit into your overall financial plan. It's possible there are options outside of KiwiSaver that you should explore as well.

Good luck.

 

 

 

Category

Weekly rate

Fortnightly payment (net)

Gross

Net

Single, living alone

$400.07

$348.92

$697.84

Single, sharing

$367.45

$322.08

$644.16

Married person or partner in a civil union or de facto relationship

$302.40

$268.40

$536.80

Married or in a civil union or de facto relationship, both qualify

Total

$604.80

$536.80

$1,073.60

Each

$302.40

$268.40

$536.80

Married or in a civil union or de facto relationship, non-qualified partner included on or after 1 October 1991

Total

$572.58

$510.18

$1,020.36

Each

$286.29

$255.09

$510.18

Married, non-qualified partner included before 1 October 1991

Total

$604.80

$536.80

$1,073.60

Each

$302.40

$268.40

$536.80

Qualified partner in rest home with non-qualified partner in the community

$287.56

$256.19

$512.38

Hospital rate

$47.31

$42.38

$84.76

 

The KiwiSaver account calculator assumes the following:

  • If you select Employed, the KiwiSaver account calculator assumes your pay increases at 3.5% per year and that your contributions increase in line with your pay. For example, $200 today will be $230 in 4 years time. The assumed pay increase of 3.5% is included in the calculations by applying a margin to the assumed long term rate of inflation (2%).
  • If you select Self-employed or Not working, the KiwiSaver account calculator assumes that the contribution amount increases each year with inflation.
  • You take no contributions holidays.
  • No amounts are withdrawn for home purchase or mortgage diversion.
  • If you join KiwiSaver after age 60, you maintain your contribution levels for 5 years.
  • The one-off Government contribution of $1,000 goes into your KiwiSaver account 3 months after the first contribution is deducted from your pay.
  • Tax credits worth the maximum of $521 are included at the end of each member credit year which runs from 1 July to 30 June. (Note: To receive the total tax credit you must be a KiwiSaver member for the entire member credit year.)
  • Your investments are in a managed balanced fund which is a portfolio investment entity (PIE). Your PIE income is taxed at either 28%, 17.5% or 10.5%, depending on your total taxable income.
  • Your net real return from the balanced fund will be either 3.1%, 3.6% or 4.0% per year depending on your PIE tax rate or prescribed investor rate (PIR).
  • Inflation of 2% is assumed.

Unless you have dual citizenship or end up applying for and receiving residency here in New Zealand, you are not eligible to join KiwiSaver.

See this link here for more on who can join KiwiSaver.

If you do end up becoming a resident and decide to join KiwiSaver but end up moving back to the U.K. at some stage, you would be eligible for early access to your KiwiSaver funds. This isn't the case if you're moving to Australia as under the TransTasman Portability agreement (set to go through before the end of the year) the money will be locked down until 65. It'll be up to you to decide which side of the Tasman you want your funds to be domiciled.

If you returned to the U.K., you would be permitted to withdraw all your savings, any returns, plus the kick-start of NZ$1,000 however the Government will retain the member tax credit portion, that is the NZ$521 max a year you receive from the Government.

Do be aware that it's not a simply a matter of rocking up to your provider and asking for a cheque. There is a mandatory stand-down period of 12 months during which you'll be required to present documentary proof of you having permanently moved. The details are explained further on the KiwiSaver website here under the early access provision. 

I hope this answers your question.

You'll be happy to hear that your KiwiSaver nestegg is tax free at the time of the withdrawal. That's because it will have been taxed along the way during your investment period.  The amount of tax you'll have paid will depend on what you are invested in, (different investments and funds are taxed at various rates) and also your prescribed investment rate or PIR. Your PIR is tied to your taxable income.

You can read more about PIR rates here on Inland Revenue's website, but in brief there are three rates: 10.5%, 17.5% and 28% and they roughly align to marginal rates.

As of April this year, your employer contributions also became subject to tax as well; employer superannuation contribution tax. ESCT varies according to your earnings and ranges from 10.5% to 33%.

$0 to $16,800 10.5%
$16,801 to $57,600 17.5%
$57,601 to $84,000 30%
$84,001 upwards 33%

Your KiwiSaver statement should have a breakdown of your fees and taxes paid although there is currently no consistency in the way that's reported among providers. That will change next year when legislative changes take effect with respect to reporting and disclosure regulations.

Going back to your original question, the short answer is no. You've already paid your dues.

If you are planning on keeping your money invested past the age of 65, it is possible to do so. The terms and conditions vary according to provider so check with yours if you're keen on going that route.

 

Q) I am nearly 50 and need to get into Kiwisaver. I feel overwhelmed about choosing a provider. I have no other investments. What are some principles I need to follow in choosing a provider? I am in the moderate category, tending more to conservative than risky.

A) Better late than never I say.  

Okay to start, I have to tell you, I'm not an authorised financial advisor. I can only give you some general guidance and information here. On that front, I will say that if you want to seek some professional advice, make sure you get it from a suitably qualified individual as under the new rules only authorised financial advisors can give you "personalised advice." Whilst registered advisors (RAs) can give you general advice on a particular asset class, my experience in dealing with them and also QFEs - qualifying financial entity representatives (for example bank tellers selling KiwiSaver) is that their knowledge of KiwiSaver is pretty basic. It might pay to bite the bullet and pay to get advice from someone who knows this area well.

The Institute of Financial Advisors (IFA) has some tips on how to find an advisor here.

For what it's worth, here's my two cents worth: 

With 15 years of employment to go you can still accumulate a fair bit of savings. 

I don't know your circumstances but just as an example I plugged in some numbers on Sorted.org.nz KiwiSaver calculator.

Assuming you earn $60,000 a year and contribute 2% of your gross income from now until 65, you can potentially build up a nestegg of $72,040 which would provide you with $93 a week from age 65 to 85. 

The inflation adjusted calculator allows you to change your contribution levels, income and life expectancy. Keep in mind that compulsory contributions will rise to 3% of gross income for you and your employer starting next April. I believe Sorted's calculator factors that in along with annual wage growth of 3.5%. 

If you were to increase your contributions to 4% of your pay each month you could conceivably end up with approximately $85,000 by 65. At 8% that rises to approximately $135,000 which would provide you with an extra $174 per week. It remains unclear to me what kind of return's Sorted used to arrive at those figures. Fees and performance will impact considerably on how much you end up with. I'll return to that point in a second.

I don't know what your marital situation is so I can't tell you exactly how much that will be on top of the New Zealand Superannuatuation. If you want to see how much you're entitled from NZS (assuming its still there in its present form when you retire) the entitlements are explained on the Work and Income website here. 

Covering the two likely possibilities: If you are single and living alone, the amount is currently $697.84 per fortnight. If you're married or living in a defacto relationship, it's $536.80 each per fortnight. 

Check out Sorted.org.nz's retirement planner to see how much you'll need for your desired lifestyle in retirement here.

So back to your original question about how to choose a provider and a fund. This is no small job given there are more than 200 funds on the market offered by more than 30 providers. Assuming you have decided that KiwiSaver is the best retirement saving vehicle for you, the biggest mistake you can make it getting overwhelmed by choice and not making one.

If you pick one today and then spend the next year growing your knowledge and find a better option, you can change over. The process is relatively easy. Before you choose one initially, ask what the fee, if any, is to change.  

Criteria to select a provider

Everyone will tell you not to get hung up on performance, which is good advice but let's face it, no one wants to get stuck with a dog in KiwiSaver. At the same time, if you're always chasing this year's winner, you'll end up like the proverbial dog -- chasing its tail. One of the key factors to consider when selecting a suitable provider is consistency in returns year after year.  That return must also reflect the level of risk you are prepared to take.

Fortunately for you, we have some excellent resources here at interest.co.nz. You can check out the KiwiSaver performance ranking list to see the average per annum returns over three, two and one year. Remember it works backwards, so the one-year result isn't the first year since KiwiSaver was established rather one year back from the latest reporting period. In this instance, June 30, 2012. Note that our results are adjusted for fees but not for tax. So the per annum returns we have compiled reflect that. 

Morningstar has some excellent reports for your perusal as well. I recommend you have a look at their data set too although it is similar to our own. You can see their latest quarterly report here.  Recently, they have begun rating KiwiSaver providers and funds. If you want to find out more about what their criteria is for rating the funds, I suggest you watch my interview with Chris Douglas, Morningstar's co-head of research on that subject. 

In brief, they have a five pillar process upon which they rate the providers. It consists of people, process, performance, parent and price. I suggest you read this document to get a more detailed explanation. 

These five principles may be useful for you to bear in mind as you choose a provider. Don't allow yourself to get intimidated by all the technical information. 

Obviously you want your KiwiSaver provider to make you money, so check out their performance relative to their peers. Remember you can't compare the results from a conservative fund to a growth fund.  Always compare like with like.

Understand the assets that make up your fund and the associated level of risk and whether that's appropriate for your age and circumstances. If you are correct in your self assessment with respect to risk tolerance, you would most likely be looking for a fund in either the conservative, moderate or balanced category.  Given your time to retirement you could possibly even consider a fund from the growth category but bear in mind that this would carry a higher degree of risk and the returns could vary considerably from year to year. That said, some of the top performance default and conservative funds have generated some pretty respectable returns rivalling the better performaning growth funds.

For more information of fund types read this.

 See Sorted.org'nz risk recommender here to determine your tolerance for risk.

Does it make sense to you?

If you can't get information from your provider, if they're not communicating it to you in a way you can understand, if you don't know how much you're paying in fees and expenses and they're not up front about it, give them a pass. Obviously it's hard to know this in advance. I would suggest talking to your colleagues, friends and following the financial media to make sense of this.

Fees

Fees are another major consideration. Regardless of how your fund does, the fees will keep coming out each year and over time, even the 15 years you'll be investing, will make a difference.

It's not only the annual fee you pay on KiwiSaver. You also pay a range of other expenses including an investment management charge, a proportion of your annual balance deducted each year. The temptation might be to go for the lowest fee charging fund but if the returns are sub-standard, this won't do you much good. You'll need to weigh up the fee and expenses against performance.  You'll find that some providers charge a pretty high fee but the returns they've generated arguably compensate for it.

Remember that you can always change providers, as well as funds, so you don't need to worry too much about getting it right from the start. First things first; determine whether KiwiSaver is a good fit for you, do your homework, ask around, think about consulting an advisor and then grow your knowledge slowly over time. 

Finally, in case you missed it, here's the top five performing KiwiSaver funds by category based on the most recent data available.

I hope some of this is helpful. 

 

 

 

How do I change KiwiSaver providers?

In theory, transferring to a new provider in KiwiSaver is dead easy.

Once you find a new provider (choosing among the field of candidates is the hard part), you fill out the appropriate forms and they do the rest.

Having changed KiwiSaver providers twice now, (one for my own account and another time on behalf of my kids) I can share with you what I have learnt so you can apply some of the lessons before you hit the button.

1) Check the fees: I appreciate that fees buried in fineprint in the investment statement that you should have scrutinised closely but didn't don't exactly make for exciting bedtime reading, but they are relevant and hugely important. Some, but not all, KiwiSaver providers will charge you for transferring out of their scheme. There's a whole slate of fees KiwiSaver providers charge for (in addition to the annual membership fees and the on-going investment management fees) that you likely aren't aware of. For example, some providers charge a $100 processing fees even on hardship withdrawal applications. Other charge as much as NZ$500 to transfer a superannuation scheme from overseas into KiwiSaver.(See also this story about how the agreement will affecting existing KiwiSavers).

Fees vary widely among the providers, so you'll only know by comparing a few (make sure you compare similar type funds) to determine whether they're at the high or low end.

2) Check your balance. During my first break up with a KiwiSaver provider the process happened within a couple of weeks. It was fast, efficient and there was no fuss. In the second instance, paper work was lost, there was no follow up at their end and when I finally did manage to push the process along it was mucked up. Apart from the disturbing fact that I had received a letter from the new provider welcoming my sons to their new scheme, when the old provider advised it was still active from their end, I was surprised to see a dramatic reduction in the balance upon the opening of the new account.

In the time that I had received my last statement and the time it took for the transfer process to happen, the fund's performance had gone from 7.33% to 1.74% so there was a substantial drop in value. I initially thought it was owing to fees but it was just owing to the performance. You might want to bear this in mind when you are changing funds. If you don't have on-line access to your latest balance statement, phone your existing provider to find out.

3) Due diligence. As per the gaffe above, it pays to follow up and confirm that the transfer process has in fact taken place. 

4) Fund. Before you switch providers, make sure you have a good understanding of your reasons for changing providers and also what you are expecting from your new one.  Don't take the fund selection process lightly either. Under the new Financial Advisors Act, Registered Advisors (RAs) can give you general advice on this issue and guide you into a fund, but remember that they are not authorised financial advisors (AFAs) who have a higher qualifications and whom are better positioned to give you personalised advice on this important decision

So, as easy as switching providers may be, mind the gaps along the way.

http://www.kiwisaver.govt.nz/providers/change/

Q) I have two kids ages 4 and 7 years and was thinking of enrolling them in KiwiSaver to get them their $1,000 kickstart. Who would be a good provider to look at? Obviously fees are important as their balance will remain at around $1,000 for some years before they start working, so for example the scheme I'm in charges a minimum annual fee of $50 which would be 5% of a thousand dollars so my kids could very likely find themselves going backwards. Any ideas of where I could look.

A) Just a reminder that we did not give advice at interest.co.nz only information to help you make an informed decision.

You rightly point out the danger of losing that $1,000 kick-start to fees and poor or low returns over time. I tackled this subject previously which can you view here but here's a rehash.

As the moment there is only one KiwiSaver provider (that I'm aware of) that does not charge juniors KiwiSavers an annual administration fee and that's Westpac. Do be aware however that there are a whole slew of other charges that apply and in fact they're the more significant fees to watch over time. Read about the various fees charged in KiwiSaver here.

As I noted last week, in this interview with Morningstar's Chris Douglas, providers will (effective April 13, 2013) be forced to disclose in detail the various fees charged on KiwiSaver products. They include "fees for financial advisors, "servicing investor specific decisions", establishment fees, contribution fees, withdrawal fees, transfer fees, switching fees and special request fees. It also includes the investment management fee which is a percentage of your balance charged every year.

Given that banks are paying the break fees to attract customers from competing banks these days, I don't see why you as a KiwiSaver with money to invest couldn't demand the same when it comes time to signing up with a provider. I expect you'll get a pat "No" as a matter of course but if you go higher up the food chain, it's possible you could have some bargaining power.

In any case, before you seize upon any "fee free" offer, make sure you are told how much you can expect to be charged in other fees, on an on-going basis, all up.

I was interested to hear from Westpac that of their more than 270,000 members, 25% are under the age of 18 so they've obviously done a good job cornering this part of the market. One wonders how many of those members are aware of that fact that they do in fact pay fees, just not the administration fee of roughly $2.50 a month. By the way, that's conditional upon the junior KiwiSaver having an account with Westpac and making a minimum of one deposit a year.

To see the entire range of Westpac KiwiSaver funds complete with fees and performance date click here.

Before you enrol your child in KiwiSaver, have a good long think about your reasons for doing so. Remember that the money can't be accessed until they turn 65 so if it's for the purposes of education, KiwiSaver won't be a good fit. It it is to help give your child a leg up on the property market, then maybe it makes sense, provided it's not at your own financial detriment.

Are you planning on contributing into their account on an on-going basis? If not, as you pointed out, they could slip backwards and then what would be the point. More than 315,000 KiwiSavers are under 18 so that's more than NZ$30 million in taxpayers money at risk of being wasted.

What type of fund?

I was curious to find out where most junior KiwiSavers are invested. I couldn't canvass everyone, but Westpac informs us that of their young membership, 40-45% are in conservative funds. Given the lower investment management fees associated with more conservative funds, this stands to reason I suppose. If parents are not planning on contributing beyond the $1,000 kick-start, the higher fees associated with more aggressive funds would eat into a higher proportion of the return.

If you want to see the effect that not contribution to your KiwiSaver account will have over time, check out the contribution calculator embedded in the following story. You can adjust the variables to determine how long it would take over time, given a certain rate of return and or contribution rate (or lack therefore) before your money disappeared or gained.

Sorted.org.nz's KiwiSaver calculator might also be of interest to determine what kind of savings you might be able to achieve over a period of time with regular contributions.

Fund managers and financial planners routinely tell you that if you are investing for the long-term then a growth or an aggressive fund is the way to go because a child theoretically can afford to withstand the higher risk (and volatility) associated with it.

Matthew Goldsack, head of investment solutions for BT Funds Management, which manages Westpac's KiwiSaver, said the high proportion of under 18s in conservative KiwiSaver funds likely reflected an intention to either access those funds for the purposes of a first time home deposit later on, or else the risk profile of the parent. The majority of KiwiSavers in New Zealand are invested in conservative funds. (To learn more about the different type of funds read this).

You might find some value in discussing your question with an authorised financial advisor.

Do you have a question about KiwiSaver? Check out our extensive list of questions from other readers or drop us an email.

Q)Financially I have been stuck in a never ending rut for some time, but I recall from when I was in a better situation being told by my bank about using my KiwiSaver funds to help me out. Please advise. 

A) Sorry to hear about your financial woes.Your memory serves you correctly about being able to tap your KiwiSaver funds if you are in dire straights.

This determination, about the gravity of your financial situation, is actually made by the trustee who governs your KiwiSaver scheme.  We all have a different idea of what constitutes financial distress so ostensibly this is a way to make a more impartial call on that. You'll remember that a few individuals tried to justify their inability to buy Rugby World Cup tickets as a financial hardship. They weren't successful. 

The following is a guideline from the KiwiSaver Act on terms of financial hardship:

Significant financial hardship includes if you're:

  • unable to meet minimum living expenses
  • unable to meet mortgage repayments on the home you live in, resulting in your mortgage provider enforcing the mortgage on your property
  • modifying your home to meet special needs because of you or a dependent family member having a disability
  • paying for medical treatment if you or a dependent family member:
    • becomes ill
    • has an injury, or
    • requires palliative care
  • suffering from a serious illness
  • incurring funeral costs if a dependent family member dies.

As you mentioned you are from Christchurch, and also on a disability benefit of some kind, I expect the threshold to prove your case won't be too hard. Following the Feb.22 earthquake, Government instructed providers to ensure that earthquake victims from Christchurch suffering from financial hardship be allowed to access their KiwiSaver funds without undue delays and effort.

That said, from what I have heard it can be a cumbersome process. To start, you'll need to go to your provider to get the ball rolling. You'll have to show proof that you are struggling financially. In some cases, trustees have rejected claims forcing KiwiSavers to go through a budgeting advisory service to see whether or not they really are in trouble. 

Considerations to bear in mind:

Before you pull the plug on your KiwiSaver, it's important to evaluate where you are at globally with your finances. In this regard, it might be worth your time to visit a budget advisory service first. You can access such services for free. Here's a link to the Federation of Family Budgeting Services. They will be able to point you in the direction of an advisor.

How much do you have?

You mentioned a specific figure that you are in debt. If you are thinking your KiwiSaver funds will pay this debt off in full, keep in mind that under the financial hardship clause, you only get back what you paid in, and your employer. So you won't get the $1,000 back from your kick-start. Nor will you get back the member tax credits from Government. Take this into account with your calculations before you go to the trouble of trying to pull your funds out.

Contributions tracking?

You should be getting an annual statement from your KiwiSaver provider alerting you to your balance. That said, a good chunk of people remain in default funds that were randomly allocated so many KiwiSavers are clueless about who they're invested with and even foggier about what kind of fund they're in. 

If this is you, you can find out who your provider is and how much you have paid into your KiwiSaver by going to the KiwiSaver website. I'm including the link here. If you are already registered as an on-line user for Inland Revenue you just plug in the same user name and password.

If you aren't registered for on-line services with IRD, you can do so here. All you need is your IRD number. If I recall correctly there is a 12 or 24 hour waiting period in between the time of initial registration and getting set up with your password. Once you've tackled all that, it's smooth sailing.

On the website you'll find out who your provider is, how much you've paid into your KiwiSaver, how much your employer has paid into it, and also how much you've received in member tax credits.

Once you have that information, you'll be in a better position to know how far your funds will go toward your debt.

Keep in mind that KiwiSaver is a long-term savings vehicle that is meant to help you financially in your retirement. If you are struggling to make ends meet today, and you're really not in a position to maintain it because you're going backwards, it might not make sense. Just make sure you've explored all your options first. It could be that a contributions holiday could be a better course of action. A qualified budgeting advisor should be able to help you make that determination if you can't, for whatever reason, do so yourself.

Good luck. 

Q) I am thinking of leaving NZ and returning to the U.K. I am 60 years old. What do I need to do to get my Kiwisaver funds?

A) As you might already be aware, permanent emigration is one of the four accepted reasons for being able to get out of KiwiSaver early. The other three are: financial hardship,  serious illness and first time home buying. Here's a link to the official KiwiSaver website outlining early access provisions. 

What do you need to do?

First, you'll need to contact your provider to obtain the required paperwork. Remember that before you can get access to that money, you'll have to have waited a minimum of 12 months but you might as well get all your ducks in a row before hand to speed up the process for when the date ticks over.  Among the paperwork you'll need is a statuary declaration swearing that you've left the country, passport records, airline tickets, as well as evidence that you live somewhere else in the U.K.

What will you get?

Basically you'll get back everything you paid into the scheme, the $1,000 kick-start, any contributions your employer or employers here  have made, plus the returns earned on the investment. What you won't get back are the member tax credits that Government chipped in over the time you've been invested. Up until July last year that was a maxiumum of $1043. That's since been cut in half to $521.

If you want to see exactly how much in member tax credits you'll forfeit, you can go to the KiwiSaver website. To access your personal information and details, you need a on-line registration user name and password. It's the same one you use to access IRD's website. This link will take you directly to the registration site for IRD. So long as you have your IRD number handy, you're in business.

If you're after more information on keeping track of contributions, check out this link.  And this one  will specifically explain how to obtain the break down in payments between your contributions, your employer and Government's share. 

If you are not on-line savy, don't stress. You should be able to get all this information over the phone from someone at Inland Revenue.

Here's the phone number.

0800 KIWISAVER (0800 549 472).

If you're calling from outside New Zealand, call +64 4 978 0800.

Calling hours are 8am to 6.30pm, Monday to Friday.

Good luck!

 

Q) Our son was 18 at the beginning of December which means he will be eligible for 7/12 of the member tax credit (MTC) as the year goes to June 30, 2012. Is the tax credit still $20 a week for this year or is it already $10? How much does he have to contribute to get 7/12 of the maximum? He has some part-time work while studying and we will top up his account so he gets the most he can. Is it 7/2 of $1040?

A) You've raised a good question. I confirmed with Inland Revenue that member tax credits are indeed tied to your son's birth date, so regardless of how much you pay into the pot, their share will be limited to the number of days he's in enrolled in KiwiSaver since turning 18 within their tax calender year. So yes, effectively he will be eligible for 7/12 of the maximum of MTC of $521 which works out to just over $300 a day. The reduced tax credits took effect from July 1, 2011, so they pay-outs are already maxing out at $10 a week. To ensure your son gets the maximum from Government, he'll have to pay $20 a week. If he wants to find out how much he's paid into the scheme, he can track his contributions on Inland Revenue's website on the My KiwiSaver section. Here's the link.

He'll need to be registered on Inland Revenue's website, which he can do here.

The rules are also explained on IRD's website here.

 

Q) I am self employed in my early 60s.  What would be my best options for getting involved in Kiwisaver and obtaining maximum advantage?
e.g. how much to contribute?  What type of fund? I will not be totally reliant on Kiwisaver funds for support during retirement.

A) Thanks for your question. I'll remind you that we are not allowed to give personalised financial advice as journalists. That said, we do have the benefit of having an authorised financial advisor on staff. Craig Simpson is our senior analyst here at interest.co.nz. In the video above, I asked Craig whether in his opinion it made sense to go into KiwiSaver given your employment status and age. Given the fact that you can still receive the $1,000 kick-start as well as a potential $521 a year in tax credit if you make a minimum payment of $20 a week (for a total of  $1,043) it was his belief that yes, KiwiSaver did make sense as an add-on to retirement savings plan.

As a self-employed person, you have a bit more flexibility than a PAYE employee in terms of how much you contribute, Craig notes. So you can pay  a lump sum amount or on a regular basis. That may be of interest and comfort to you if your business revenues are lumpy.  You can elect to wait until just before the end of the year cut-off before putting in the required minimum amount ($1,043) and still receive the government contribution. 

You might wonder if it makes sense to pay more than the minimum required to receive the full member tax credit entitlement. Craig didn't think so.

"Why put in more than you have to to get the full government pay-out", he said.

What's less certain, is the type of fund you should be invested in. (To see a full list of KiwiSaver options and their profiles click here).

With potentially only a few years invested in KiwiSaver, chances are you don't want to take any unnecessary risks with your money and therefore a conservative fund makes most sense. That said, given extended life expectancy these days, many financial advisors suggest that a higher allocation of equities in your portfolio may be necessary to generate sufficient returns to see you through retirement. So it's possible a balanced fund (which would have a higher exposure to growth assets) may be better suited to your needs. It would depend on your appetite for risk, your current liabilities ( ie. debts) and the other retirement investments that you alluded to. A financial advisor would be best placed to advise you given a review of your circumstances in whole.

Risk and return

"You can't generalise that just because you are getting more mature that you should be any less risk adverse or more risk adverse. You could go the aggressive route and say 'Let's try for the next four-five years to maximise returns' but you balance that off against risk. I'm a bit more cautious. I've been in the markets a long time and have seen the destruction it can cause so I tend to lean toward the more conservative side. This person says they aren't totally reliant on KiwiSaver which says to me 'It would be nice to have my capital there.'

"You also have the chance to have a bit more fun, have some equities in there as well so that conservative to balanced option may be appropriate but that's where a financial advisor would come in and assess the whole criteria of risk and return and what you are looking to achieve and your total financial situation.''

"You've got to take some risks to build up that asset base. In the same vein, you can't necessarily take that much risk if you're reliant on the money. So you're caught between a rock and a hard place."

Additional considerations for you are how much you'll be paying in fees on your KiwiSaver, and other investment options outside of the scheme.

"So you have that core component that is your set and forget, your rock for your trouble times, and then have a bit more fun on the side. Talk to a broker, a financial advisor, get good advice."

Considerations for retirement

  • Where does KiwiSaver fit in the bigger retirement picture? Is it your only retirement saving fund or just a bolt-on addition.
  • How comfortable are you with risk, and how much volatility can you afford to stomach?
  • What's your timeframe for investing?
  • What's your desired lifestyle in retirement? How much will you need?
  • Do you want to consume your capital or preserve it?
  • What are you fees in KiwiSaver all up?
  • Are you likely to receive any inheritances?
  • Will you be making any "one-off" major expenditure (e.g. buy a new car, travel etc)

Q) I am about to purchase a home for myself and my fiance using my KiwiSaver as a deposit and a HNZC subsidy. In the event we split up, would I be guaranteed my deposit back plus half of any other profit we made? Am I allowed to do this or does the sales and purchase agreement have to be in my name only?

A) Interesting question. It's terrible to have to think about the ugly aftermath of a relationship when you are just starting out your lives together but statistics speak for themselves so it's not unwise to explore these sort of questions sooner than later.

I checked with a few sources to get your answer. Firstly, I contacted a mortgage broker (who also happened to be an authorised financial advisor) who advised that as this was a legal issue you'd have to consult a lawyer, which I subsequently did on your behalf.

Fiona Jagiello, a solicitor with Mcveagh Fleming informs that the concern you have is one best dealt with in the context of a relationship property agreement done through a  lawyer. She said you could do this at any time but to reduce the likelihood of conflict down the road, suggested it was probably best handled before marriage and before purchasing the home. Having an agreement on what's rightfully yours and theirs in place before you marry allows you some protection over what assets, if any, you brought into the relationship as if and when you got divorced, everything is cut in half. The cost of having one of these agreements written up for you varies according the level of complexity. If it's just the deposit you are concerned about losing and want protection for, it sounds like a fairly straight forward matter that could be done for a few hundred dollars. This document will specify that whatever extra money you put on the table for the house doesn't form part of the relationship property.

It's important to note that if you've been living together for three years already then protecting your assets could be alot trickier because the law considers you to be in a de-facto arrangement.  The implication of that are that anything you have acquired while living together could be considered relationship property and therefore subject to division. 

This arrangement between you and your future spouse won't reflect on the sales and purchase agreement, which you'll both likely sign off on. The ownership of the house will be structured by your solicitor in one of two ways: as "tenants in common" or as a "joint-tenancy." The former allows you to split the ownership of the house however you see fit or fair. ie. 1/3 to 2/3  or whatever the case may be. The latter arrangement basically ensures that if you or your spouse dies, the other half goes directly to them and not your estate. So how you structure the title of the house has to do with right of survivorship.

You might wonder, in light of the tenants in common ownership structure, whether it is necessary to go the pre-nup route.

Jagiello says the two work in combination. If you are already concerned about getting your half of house back in the event of a separation, and you'll be paying more of the mortgage and rates and bills, that might also be something to specify in the context of the relationship property agreement as well.

Hopefully not of that will come to bear and you can live happily ever after in your new home. Good luck.

 

 

 

If your human resources or payroll department doesn't know who your provider is then your next port of call is Inland Revenue.

After your employer collects your contributions and puts in theirs, the money is forwarded to Inland Revenue for distribution to the provider. Given you don't know, you likely ended up with a default provider. There are six default providers approved  by government and if you don't make an active choice for a provider you'll get put into one of them.

They are: Mercer, OnePath, Tower, AXA, ASB and AMP. (See our comprehensive list of scheme providers here).

You can find out which one by going to the official KiwiSaver website (www.kiwisaver.govt.nz) then go to MyKiwiSaver and log-in with your IRD user name. If you don't have one, get one. This is a useful on-line site to have access to.

Once logged in, you'll see your provider's name in the right hand side under your contact details. You'll also see a breakdown of how much you've paid into KiwiSaver, how much government has paid into it, how much you've received in member tax credits, and also interest from Inland Revenue.

Again, this is a useful one to go back to, so well worth the time to register as a user. I'm hoping that you're new to KiwiSaver as by now you should have heard directly from your provider. Once you find out who they are, make sure they have your contact details correct so you can start receiving update on your account from them directly. The one thing you won't find on the KiwiSaver website, and which is crucial for you to know, is how much you are paying in fees to your provider, and how much money you are making from your investment.

 

 

 

Q) I would like to understand the information that you provide on your KiwiSaver Rankings page. My question is about the three year figures. For example, Mercer Conservative has a reported performance figure of 6.2% per annum. Does this mean the total interest for the last three years was 6.2% or would be it be a total of 18.5?

A) Thank you for asking this question as it may help other readers better understand what and how we are reporting this data.

Research house Morningstar also reports on KiwiSaver fund performance and their layout is opposite to ours in that they report on the latest one year performance working back four years. We take the three years (using the most recent year) and work backwards. We will eventually have four year data. If you watch the video, Craig walks you through the process so it might be easier to follow. So for the most recent data we have, which is up to the end of  December 2011, the reported three year result has been annualised.

With reference to Mercer's conservative fund that means we have calculated its performance for the three years going back from last December as 6.2% per year. So we've averaged the performance out over those three years to arrive at that figure. Keep in mind that figure is also less tax (we used a rate of 28%) and less fees. We have attempted to total all the fees that the providers charge to give you a more accurate idea of what you'll be left with at the end of the day. Fees are a complex area and there isn't (at present) any uniformity to how and what providers make public. However, we've done our best to total it for you using the annual membership fee, the investment fee, administration fees and trustee fees.

If you look at the one year performance on the far right of our tables, that relates to the most recent year in KiwiSaver working backwards, not the first year that the fund was started. If you search Mercer Conservative in the find your fund section you'll note that we have the inverse order, one, two and three. Hopefully that won't confuse you. The thinking of doing three, two and one years in our performance ranking was to draw attention to the longer time frame given our view that more weight should be placed on long-term performance than short because KiwiSaver is a long-term investment vehicle.

Your own experience in KiwiSaver will depend on your contributions, when you began, your employer's contribution and the performance. The purpose of our tables is simply to enable you to loosely compare the performance of your fund with similar funds, which is why we have categorised them into default, balanced, moderate, growth and aggressive funds. Generally speaking the fees are higher relative to the risk of your fund, and the more shares in your fund, the higher the risk.

For more on how funds differ and why, see our investment management 101 series by Kevin Mitchelson here. I would suggest starting with the first in the series explaining absolute returns and benchmarking  followed by the difference between active and passive management (which can account to a large degree for the fee differential in KiwiSaver) is also informative.

Do you have a question about KiwiSaver? See our Q&A section here or send us an email.

Q) Do KiwiSaver providers have to make unit price information publicly available? Recently it seems AMP has stopped providing daily unit price data, this makes tracking fund performance very difficult.

A) According to the  Financial Markets Authority, KiwiSaver providers are under no compulsion to make public daily unit prices. However, many providers will and do make that information available on a monthly basis. AMP is looking into my request for this information and I will advise when I get a response.

For what it's worth, our in house financial analyst Craig Simpson (also an authorised financial advisor) doesn't think tracking unit pricing on a daily basis is going to serve you all that well. That's because KiwiSaver is a long-term investment product and as such there will be little gain in monitoring daily movements of unit prices. Regardless, if you are determined to keep an eye on AMP's unit prices, here's how to do it:

Go to www.amp.co.nz, click on the investments tab, followed by investment returns, AMP KiwiSaver scheme and then go to the fund returns link.

On the subject of reporting requirements, I would note that the matter is currently under review by the Ministry of Economic Development. You can expect a change either this year or in 2013 on what and how providers' report on both fees and performance. Why? Because currently there is no consistency in how they go about this. The MED's new rules aim to rectify this glaring flaw in KiwiSaver.

The KiwiSaver Act gives you the option of taking the money outright, or if you are moving to Australia it can be transferred into an equivalent savings scheme there. Remember workplace savings in Australia are compulsory so you'll be auto enrolled once again when you start work there.

There is, at present, a minor hitch with the savings transfer option. In order to transfer the money into a super scheme across the pond, the Australian government will need to sign off on the Trans Tasman Portability Agreement. New Zealand signed off on its end in 2010, however Australia has yet to do so.

It is expected they will have done so by the end of this year.

How to apply for a permanent emigration withdrawal

Contact your KiwiSaver provider.

If you're applying for this type of withdrawal you must include:

  • a statutory declaration stating you have permanently emigrated from New Zealand, and
  • evidence that you have:
    • departed from New Zealand (for example, your passport records), and
    • lived at an overseas address at some time during the year after your departure from New Zealand.

What happens if you return to New Zealand?

If you return to New Zealand you can rejoin KiwiSaver if you're eligible, but you won't get another $1,000 kick-start.

In terms of how much money you'll get back, it depends on which option you take.

If you take the money and run, you'll get all your contributions, whatever your employer paid into it, the $1,000 kick-start and all the returns it's earned. The member tax credit portion gets withheld. If however, you decided to stay on the savings bandwagon, you'll be rewarded for doing so in that you'll get to keep your member tax credits.

To determine how much in member tax credits are at stake, if your decision is riding on that, you can get a break down of your total contributions from yourself, your employer and the government on the KiwiSaver website. If you are registered as an online user for Inland Revenue's website you can use the same log-in. To read more about tracking your KiwiSaver contribution click here.

And if you're not among the 38,000 plus New Zealanders who left for Australia last year but are thinking about it, check out our "will you be better off calculator" to see whether you'll really be better off? More food for thought.

Do you have a question on KiwiSaver?

Check out our KiwiSaver Q&A section or drop us an email if you can't find your question there.

Opting out of KiwiSaver will not prevent you from getting back in a second time if you reconsider. According Inland Revenue, when someone opts out of KiwiSaver, it's like they've never joined so there's nothing standing in your way of coming back. If you opted out the first time, you would never have received the kick-start or paid into the retirement savings intiative as there is a stand-down period before the contributions start taking effect. That means that yes, you'll qualify for the kick-start of  $1,000 as long as it remains on offer as well as the member tax credits.

I was however interested in hear the following from IRD should you get cold feet a second time.

If you are starting a new job, you will be automatically enrolled in KiwiSaver. As such, you have the option of opting out provided you do it within eight weeks. You also have to wait two weeks before you can apply to opt out as well. If you're past the eight week period, you might be eligible for what's called a "late opt out"or you can apply for an "early contributions holiday." However, and this is the interesting part to me, if you voluntarily sign up to KiwiSaver through your existing employer or through a provider, you can't opt out. So if you do elect to go this route, I would suggest you think it through carefully. Here's a link to the Government's KiwiSaver website explaining the opt-out rules. It also contains a dowloadable form for the opt out application which is returned to your employer or Inland Revenue.

For your interest, I've also looked up the conditions under which you may be eligible for a late opt-out for a period up to three months after receiving your first contribution.

  • your employer didn't supply you with a KiwiSaver employee information pack (KS3) within 7 days of you starting your job
  • Inland Revenue didn't send you an investment statement for the default KiwiSaver scheme that you were allocated to
  • your employer didn't give you an investment statement for their chosen KiwiSaver scheme
  • events outside your control prevented you from delivering your opt-out notice on time
  • you were automatically enrolled when you shouldn't have been.

 

 

OnePath manages 2 KiwiSaver schemes:  the OnePath one (click here) and the SIL one (click here)

The SIL scheme offers more single sector options like fixed interest and international shares.

The multi-sector funds, like balanced, growth, etc, in the 2 schemes look pretty much identical in terms of what they invest in but the management fees on SIL are higher.

Cheers, Kevin

 

 

Thanks for your email. The quick answer is no but hang on as you've touched upon a juicy issue here.

For starters let me say, wow! That's great you've been contributing more than the minimum amount (4%) and also that your employer is matching you dollar for dollar too. I don't know what your salary is but if you've been invested for three years now, and you haven't been with a dog of a provider and or a money losing fund, you must surely have a decent nest egg built up. Your savings habit (at 4%) is to be applauded, same goes for your employer. As you are probably aware they are only obliged to contribute 2% and if National gets re-elected that will be raised to 3% in April 2013. Your higher contribution rates put you leagues ahead of the game. If you don't believe me, have a play with our retirement calculator here and change the values around to see the difference.

Back to school

Going back to school is a good investment in my opinion despite all this talk about college bubbles. However it is not, at present, one of the grounds upon which you can cash in your KiwiSaver chips. Ngai Tahu has a savings scheme similar to KiwiSaver (called Whai Rahu) which does allow a draw down for education purposes which is something that will hopefully be introduced one day to KiwiSaver.

Just to recap, there are four permitted reasons to take your money out of KiwiSaver before 65: significant financial hardship, serious illness, first time home withdrawals, or a permanent move abroad. (See early access on the KiwiSaver website for more).

Obviously, it would be unreasonable to expect you to contribute making your current levels of contributions were you to return to full-time studies. (See change of work explainer here). If and when you leave your job, your employer's contributions will simply stop. You'll have to notify your provider that you are no longer in paid employment. (See also KiwiSaver contributions holiday here for more.)

Contributions holidays can generally only be taken once you've been in KiwiSaver for 12 months. As you've been working for three years already you'll be sweet in terms of eligibility. Like all holidays, KiwiSaver contributions holidays aren't forever. The minimum is three months and the maximum five years. Unless you decide to go on and do a doctorate, I expect you'll be fine.

If you wanted to continue making lump-sum payments while you're going to school, there's nothing stopping you from doing so. The benefit of doing this is that if you contribute at least $1,042.85, you'll also get another $521 in member tax credits from Government, under the current rules.

I'm not sure if your decision to return to school is contingent upon having access to those KiwiSaver funds. I'm guessing you'd like to go back to school without having to borrow money to fund it. I don't blame you, I'm debt averse myself although I know there are times when "good debt" is worth the price, in terms of the long-term return. If you're getting a degree that will boost your earning ability, further your career and lead to better opportunities it could be worth it.

The following may or may not have any influence of your decision, however more information is always better I reckon.

I was curious to know how much a two-year gap in contributions at your current rate (assuming you are looking at a two-year Master's) would cost you in the grand scheme of things. None of the KiwiSaver calculators I could find compute this so I had my excel-friendly colleague do the numbers for me based on a few assumptions.

If I'm way off here you can do the same on a spreadsheet.

I took a guess and put you in your late 20s. For the purposes of this exercise, we said 28. We also took an average Kiwi salary of $50K. On the face of it, bowing out of KiwiSaver for a period of two years, given your present contributions and that of your employer, you'd be $8,314 poorer for it at the end of the 2 years assuming a 4% after tax, after fees return on the missed contributions. That doesn't include the $521 a year member tax credit from Government. That $8K may not seem like much in the grand scheme of things however when you factor in the compounding return you will be missing out on between the ages of 30 and 65, you're looking at a loss of close to $33K. I know, took me by surprise too. We assumed an after tax, after fee return of 4% until retirement age.

Put in this light, a contribution holiday doesn't look so attractive does it? And the same time, being trapped in a job that you dislike just for the sake of a comfortable retirement isn't so hot either.

Before you pull the plug on both KiwiSaver and the job put on your thinking cap and explore your range of options fully. If your employer is paying you 4%, maybe they value you to the point where they wouldn't want to lose you.Would it be possible to return to school part-time and have them help with the costs as well? Obviously, it would have to be a two-sided arrangement that was mutually beneficial, so you might have to commit to them for a few years afterwards.

I know our employment situation in NZ isn't as dire as other parts of the world, but there is something to be said for job security and a decent employer as well.

If asking them to put you through school  is a bit much perhaps you could look at a Master's programme that could be stretched out over a longer period of time, so you could study and keep your job, as well as keep those savings in tact?

And a final thought, if it's boredom on the job or perhaps lack of opportunity, have you tried discussing your future with your employer? I've had some horrible managers over the years but also some really good ones and my experience is that those bright enough to know talent will do what they can to retain it.

Good luck with your decision.

Here's some links you might find useful as well as an excerpt from the KiwiSaver website explaining how to apply for a contributions holiday? Also, you may want to check out KiwiSaver Q&A section for other questions that have been raised by our readers.

Our retirement calculator

Sorted.org.nz KiwiSaver calculator

KiwiSaver website

 

How to apply for a contributions holiday

To apply for a contributions holiday or an early contributions holiday you can:

  • apply online if you're registered for My KiwiSaver, or
  • print off and complete a Contributions holiday request (KS6) and post it to Inland Revenue (address details are on the form), or
  • call Inland Revenue on:
    • 0800 549 472 (0800 KIWISAVER), or
    • 04 978 0800 if calling from a cellphone.

Find out more about the contributions holiday process.

What happens to your contributions?

While you're taking a contributions holiday:

  • your employer is not required to make compulsory employer contributions
  • you can still make voluntary contributions.

Thank you for raising this issue. It's an interesting one.

At present, KiwiSaver members are married to one provider so there is no scope for an "open architecture" system where they would be able to split their retirement saving funds among various providers as is the case with the U.K., America and Australia.

The argument in favour of open architecture is that it spreads risk and allows for greater diversification. When the alternative is having all your eggs in one basket with one provider, it seems not unreasonable. It stands to reason that using multiple managers lowers the risk of one of them losing the plot and/or all your money.

That said, there are several KiwiSaver providers who invest through multi-managers so one might argue there is already a form of open architecture in place under KiwiSaver if you are deliberate about who you choose and what fund. Most providers also offer members the option of splitting their KiwiSaver savings among different types of funds on offer each with unique asset allocation and varying levels of risk.

Also, it's not like you can't get a divorce in KiwiSaver. If you're truly unhappy with your current provider, you can change and the process is relatively easy. I've switched myself so can testify to that.

And finally, Section 53 of the KiwiSaver Act (2006) allows for members to have a KiwiSaver scheme running concurrently with another super scheme.

All those options may not offer the same flexibility of a true open architecture system but it is better than nothing I suppose. And yet as KiwiSaver funds grow over time, members should be afforded the luxury of choosing more than one provider to manage their money.

Here's a few links on open architecture you may find interesting.

http://retirementincomejournal.com/issue/april-13-2011/article/riia-gets...

http://www.scotsman.com/business/personal-finance/open_architecture_your...

The two questions you raise are fairly complex as they are loaded with ifs ands or buts however the short answer to your question is a simple no.

Your status as a joint-owner of a property (even if it an LTC investment property that you and your brothers rent and have no plans to live in) automatically disqualifies you for the KiwiSaver first-time home subsidy. Or that is what I was told by an agent at Housing New Zealand Corporation. I would double check with them and your provider to be safe as I've had conflicting information in the past (even from IRD) so wouldn't want to mislead you.

Under normal circumstances, i.e. you living in New Zealand and not having owned a home before, you would be eligible to use your KiwiSaver funds (after three years invested in the scheme) as a deposit on a first time home and potentially (depending on your income) be able to receive a another subsidy from Housing New Zealand Corporation, the same outfit that coordinates the Welcome Home Loans that you mentioned.

In case you were curious, the HNZC housing subsidy is $1,000 for every year invested in KiwiSaver up to a maximum of $5,000. If you are going in on a property with other qualifying buyers, you'd be able to pool your money. The income threshold is NZ$100,000 (for an individual and couple) and $140,000 for three or more individuals.

If at some point you sold your share of the property, then you might be able qualify for a KiwiSaver first time home subsidy potentially and there are allowances for previous property owners. (See the Housing New Zealand Corporation Website for details here).

To do so, you would have to meet the following criteria:

  • I have not received the first-home withdrawal before.
  • I have previously owned a home, but no longer have a share in a property.
  • I have a combined yearly income of $100,000 or less (before tax) (for one or two buyers) or, I have a combined yearly income of $140,000 or less (before tax) (for three or more buyers).
  • I do not have realisable assets totaling more than 20 percent of the house price cap for the area I am buying in. Realisable assets are belongings that you can sell to help buy a house. For example if you were buying a house in the $300,000 house price cap area, your realisable assets cannot be worth more than $60,000. Housing New Zealand considers the following to be realisable assets:
    • Money in bank accounts (including fixed and term deposits)
    • Shares, stocks and bonds
    • Investments in banks or financial institutions
    • Building society shares
    • Net equity in property or land (not being used as your home)
    • Boat or caravan (if the value is over $5,000)
    • Other vehicles (such as classic motorbikes or cars — not being used as your usual method of transport)
    • Other assets valued over $5,000.

Welcome Home Loans can, under certain circumstances, be used in conjunction with a KiwiSaver savings withdrawal but not in your case because you own a property already.

These loans allow qualifying individuals to borrow up to NZ$200,000 without a deposit or NZ$350,000 with only a 15% deposit. I was curious to find out what the interest rates are on these kind of loans. I wasn't able to poll all the participating lenders but one of them informed me that rates are quite often 50 basis points higher than their regular going rates on first time home mortgages.

For example, First Credit Union, advises that their welcome home loan rate is presently 6.99%, compared to the standard 6.45%.

Ultimately, it is up to the participating lenders. Another bank, SBS advised that their rates for welcome home loans are no different than their first time mortgages. Their rate, incidentally is 5.65%, so well worth shopping around.

If you ring to get a quote from any of the lenders, don't be shocked when you're told a much higher amount. That's because under recent rule changes by the HNZC, lenders are required to tack onto their quoted rates an extra 1.5%, a cushion for the lenders and corrosive acid test for the borrowers I suppose in case markets when haywire in the intervening time. I'm advised this is a normal practice used for most borrowers going through the process of mortgage approval to determine their ability to service the mortgage. Their actual rate doesn't include the 1.5%.

There's also limits and conditions on where you can buy under this programme. All the more reason to explore all your options thoroughly if you plan to go this route.

I hope this is of some value.

When you ask about getting money out earlier than 12 months, I am assuming it is on the grounds of a permanent move overseas because under other conditions of early access this minimum mandatory waiting period is not relevant.

Just to review, the KiwiSaver Act allows for early access to your KiwiSavers funds on four grounds:

With respect to the last one here, you obviously know already that you have to wait 12 months before your funds are released.

We had an earlier question come to us similar to yours and the response I received from Inland Revenue was that economic uncertainty related to a deliberate move overseas was insufficient reason to bypass the 12 month waiting period. That said, if you were determined to get at your money, and felt there was a genuine case of financial hardship, it would be the trustee overseeing your KiwiSaver who would decide.

My understanding is that the test for proving significant financial hardship is fairly rigorous and you must front up with all manner of evidence (including a budget) to support the application. If you were successful in arguing your case, keep in mind that you won't get the entire pot of money sitting in your account.  What you'll get is the $1,000 kick-start plus the contributions paid by you and your employer plus any gains made in the time you've been a member.

What you won't get, are the tax credits paid into your KiwiSaver fund by Government during that time.

Obviously, I don't know your personal situation but I sense a bit of desperation here. Whether you love or loathe KiwiSaver, it is a retirement savings vehicle, not a term deposit. As such it is designed to be hard to get out of.

Without wanting to fear monger, the more I hear about New Zealand Super, the less confident I am in its long term survival. If you plan on returning to New Zealand at some point, I wouldn't be banking on the NZS to see you through old age.

Retirement may seem like a foreign planet at this stage, if you are just starting out, but the years creep up very quickly. The earlier you start saving, the better off you'll be in the long-run -- whether is is through KiwiSaver or another saving platform is up to you. Knowledge is money so educate yourself about the choices available to you.

Under new a bi-lateral agreement with Australia, you can transport your KiwiSaver money with you and dump it into a comparable super fund. If you plan on working there, you'll be forced to pay into one anyways, this way you'll have a head start.

You can also leave your money here and make voluntary contributions where you can.

The key thing is keeping tabs on its performance, how much you are paying in fees and how it is doing relative to its peers. You can get all of that on our website under the KiwiSaver section, so stay in touch. And good luck!

 

 

 

Hopefully you are musing about this question and not mulling it over with respect to your personal circumstances because I have bad news.

Just because you can't touch your KiwiSaver funds doesn't mean the Official Assignee (the person who manages your bankruptcy) can't.

Although the KiwiSaver Act is silent on the issue, the Insolvency and Trustee Service's position on KiwiSaver is that it is fair game in the event of a bankruptcy and creditors need to be repaid. (See more on bankruptcy procedure and options here).

Robyn Cox, manager national resources and Southern Region for the Insolvency and Trustee Service, advises that upon adjudication of bankruptcy, all assets go to the assignee and KiwiSaver is treated no differently than any other liquid assets.

Where things get tricky is how providers view the official assignee's request to get at the money. Seems not all providers are reading from the same song sheet on this matter.

Cox wouldn't disclose the respective positions of those providers with whom the Insolvency and Trustee Service has dealt with to date short of saying there was a difference of opinion.

"We regard it as an asset but some providers don't accept that.''

Cox said the office was currently working with providers to reach a consensus pending a court ruling or change in the legislation to bring clarity to the issue.

Instances of KiwiSavers funds being cashed in early on the basis of a hardship claim put forward by official assignees have been few and far between given overall membership, now close to 1.8 million.

Part of that is because when you go bankruptcy you lose the obligation to pay your debt, said Cox.

Still, as membership in KiwiSaver continues to grow and economic hardships experienced by Cantabrians work through, Cox said it was inevitable that the protection afforded to KiwiSaver funds would be tested. 

For that reason, she said it was important to get some consistency on the matter.

Default providers Tower Investment and Fisher Funds said they did not have a position as yet as the situation had not presented.

A spokesperson for KiwiSaver scheme OnePath (also one of the default providers) said it followed "best practise" prescribed by Workplace Savings. (See excerpt below for details).

Generally speaking, from the time a bankruptcy as been adjudicated,  the debt repayment window remains live for a period of three years, or until the individual involved has been "discharged.''

So even though debt obligations are 'lost', any assets or money accrued during that time can still be applied to pay off affected creditors.  If, for example, you should come into money, say an inheritance, that money could potentially also be applied to pay off bad debts within that three year window.

KiwiSaver is looked upon in the same light even if those funds are "locked in.''  

Ultimately, pending legislative clarification, the decision would most likely be made by the trustee who oversees a particular provider. This is because the trustee is the authority tasked with evaluating hardship applications which is the procedure whereby KiwiSaver funds are released before maturity at age 65.

If the bankruptcy occurs in retirement (after age 65) then the official assignee would in principle have uninhibited access.

Official Assignee

Under the KiwiSaver Act, there is no specific provision that permits the Official Assignee (OA) to withdraw a KiwiSaver member's account balances in the situation where a member becomes bankrupt. In these instances, the OA stands in the shoes of the KiwiSaver member in relation to his/her assets whilst the member is bankrupt. Any dealings/instructions we have or receive in relation to the bankrupt KiwiSaver member or his/her account must be from the OA, not the member.

If the OA is wanting to access the member's account balances while the member is a bankrupt then the withdrawal must fall within one of the permitted early withdrawal grounds set out in the KiwiSaver Act (significant financial hardship, serious illness, permanent emigration).

Note that bankruptcy, of itself, does not automatically amount to significant financial hardship once bankruptcy has been adjudicated. Entry or pending entry into the No Asset Procedure (see http://www.insolvency.govt.nz/cms/personalinsolvency/whatisthenoassetprocedure) or the prospect of a Summary Instalment Order (see below) under the Insolvency Act 2006 are likely to be consistent with a finding of significant financial hardship, but are not conclusive factors.

The OA may liaise with the bankrupt member to get the member to make a significant hardship withdrawal (SFH). This withdrawal must follow the normal process, in that the member must apply for the withdrawal, and the withdrawal request must meet all of the requirements (statutory declaration, statement of assets and liabilities, etc). It may be appropriate to seek further information from the OA as how funds released would be applied to relieve the member from the significant financial hardship being faced. If the Trustee considers that the member meets the criteria for a SFH withdrawal, then any withdrawal payment must be made to the OA or in accordance with the OA's instructions. It might be appropriate to check at www.insolvency.govt.nz as to whether the member has been adjudicated bankrupt or otherwise.

Hope this is somewhat help.

Before we can answer your question as to how KiwiSaver can make money when it is not interest bearing,. like a bank term deposit for example, we need to explain the structure of a KiwiSaver Scheme.

In basic terms, every KiwiSaver scheme has a trustee who job it is to make sure that what is said in the legal documentation is being adhered to.  This trustee holds the money you, your employer and the Government contribute to your KiwiSaver.

In addition every KiwiSaver scheme has a manager.  It is important to understand that you are not investing in the manager and, unless they have been acting fraudulently, you will not lose your savings if the manager goes under.

Next, almost all KiwiSaver schemes have a number of funds that you can choose from.  As an example, look at the AMP KiwiSaver scheme which has 12 different funds which you can see here.

Each of funds invests in a different mix of cash, bonds, shares, property and other types of assets.

So if for example you were in the AMP Balanced Fund you would have your savings in 5% cash, 20% New Zealand bonds, 15% international bonds, 15% New Zealand shares, 35% international shares and 10% property. (These percentages can move around a bit depending on which type of assets the manager feels offers the best value).

Your money will be pooled with everyone else's who has invested in that particular fund.

Each of the investments can generate two types of return: income and changes in the value of the asset- and you hope that over time the value of the assets will go up and not down.  If they do, or it is generating income, then the value of the fund increases and your share of it increases.

KiwiSaver does not pay interest as this return is locked away until you retire (or buy your first home).  It is important to understand that the institutions that are promoting a KiwiSaver scheme or managing the funds, do not promise a particular rate of return.  You own your share of the assets in the fund and it is your risk as to how much the rate of return will be.

How do you know what the rate of return on your KiwiSaver fund is?

There are twp ways. The manager of the KiwiSaver scheme will publish on their websites, hopefully on a monthly basis, what return the fund has generated over the past month, three months, year, etc.

However, a more exact way is to look at what is know as the unit price. 

Most KiwiSaver schemes are what is know as "unitised".  Your dollar share of the fund is calculated by multiplying the unit price by the number of units you have bought in the fund.  Your statement from your KiwiSaver scheme will tell you how many units you have. Many KiwiSaver schemes publish unit prices, so you can tell whether your fund is doing well or not.

As with most things in life though, it is not quite that simple. 

Most unit prices are published before tax and before some expenses - they usually take into account the investment management fee, which is the largest.  So instead of adjusting the unit price down, what happens is that you get some units deducted from you balance in order to pay the tax and expenses that are not accounted for in the unit price.

I hope this helps you understand how KiwiSaver gives you a return when there is no "promised" rate of interest.

 

Thanks for you email. You raise a good question given the volatility of the markets and investors second guessing the value of stocks and bonds amid the desperate search for sustainable returns.

I consulted with few experts to see what they had to say. It's a bit of a numbers story so bear with me.

According to research house Morningstar New Zealand, only 12.35% of the total pool of NZ$8.52 billion currently in KiwiSaver is invested in New  Zealand equities. The numbers are growing all the time but that was as of June 30, 2011.

As Morningstar researcher Chris Douglas explains further, that 12.35% equates to just over NZ$1 billion, "a very small amount even for the relative illiquid New Zealand stock market.''

The New Zealand sharemarket is capitalised at NZ$55 billion and average daily turnover is around NZ$125 million.

So based on average daily trading volumes, Morningstar doesn't expect KiwiSaver will be pushing stock prices up, not by a significant margin anyway.

Douglas said it was important to remember that KiwiSaver was a regular savings investment, a structure which restrains stock inflation to some extent.

"While liquidity is tight in the New Zealand equities market, the important point to remember with KiwiSaver is that money is incrementally being added into the market over time rather than huge pools of money coming in and swamping the market."

So taking your question and applying it to global equities market, KiwiSaver is but a "tiny drop in the ocean,'' he added.

Carmel Fisher, director of Fisher Funds, concurs. She has fielded similar questions in the past about the potential impact of large funds flow from the NZ Super Fund, Kiwisaver and other managed funds driving up the market for the purchasing of favoured stocks.

Fisher also maintains KiwiSaver volumes simply are not big enough to make any significant difference.

"The reality is that the New Zealand share market has sufficient scale and depth such that no one investor, even investors such as the Super Fund (with NZ$19.2 billion under management) and a combination of all KiwiSaver funds (assuming they all acted in unison), is large enough to drive the market direction for any length of time. 

"That is not to say that large investors can’t have a significant impact on the price movements of individual stocks on any given day – this does indeed happen – but to buoy the market over extended periods would require significant flows of capital.''

By Fisher's estimation, about NZ$2 billion of the NZ$8.5 billion pool of KiwiSaver money is invested in growth funds.(For more on types of funds, see our KiwiSaver funds section here).

Given the typical growth fund allocation of 10-25% to New Zealand equities, Fisher roughly approximated that NZ$200-500 million had been invested in the sharemarket over the past four years, the rough equivalent of a few days of market turnover.

She estimated another NZ$70 million or so was invested into New Zealand equities via balanced KiwiSaver funds, which has a slightly lower allocation of shares.

Brian Gaynor with  Milford Asset Management also said it was difficult to see how KiwiSaver money could inflate the NZX particularly if money from other sources was moving out of it.

"There may also be other money coming out of the sharemarket at the same time so the NZ sharemarket could be suffering a net loss of funds at present. We don’t know.''

The table below, provided by Morningstar, shows the estimated funds flowing into all KiwiSaver funds for the first six months of 2011. (It is based on figures provided to Morningstar by most but not all KiwiSaver providers so is therefore rough).

The portion invested in New Zealand equities is approximately NZ$152 million

Estimated Share Class Net Flow (Monthly) 2011-01 Base Currency

Estimated Share Class Net Flow (Monthly) 2011-02 Base Currency

Estimated Share Class Net Flow (Monthly) 2011-03 Base Currency

Estimated Share Class Net Flow (Monthly) 2011-04 Base Currency

Estimated Share Class Net Flow (Monthly) 2011-05 Base Currency

Estimated Share Class Net Flow (Monthly) 2011-06 Base Currency

Flows into NZ Equities in 6 months to end June 2011 (*0.125)

375,193,715

349,488,879

346,333,151

332,274,030

291,447,581

307,215,728

152,268,764

I hope this has been helpful.

 

 

Unfortunately getting your money out of KiwiSaver once the eight week-window to get out has closed isn't easy. It's a long-term savings vehicle and as such is meant to protect you from yourself.

There are four circumstances under which you might be able to qualify for early access; buying your first home, moving overseas permanently; significant financial hardship; or serious illness. 

 

While you rightly qualify for early release on the grounds of a permanent move, Inland Revenue wants to be assured that you are actually leaving forever and not just going on a holiday, hence, the 12 months waiting period.

I would have thought that you might qualify under the hardship clause, but the opinion I received from Inland Revenue was that moving countries didn't constitute a hardship. I guess if they think you can afford to buy a ticket out of New Zealand and afford all the expenses that a long distance move to the U.K. entails,  you are not suffering "significantly financial hardship.''

As the decision about your personal circumstances isn't made by Inland Revenue it's possible you could plead your case  with a more sympathetic audience. That would be the trustee that is overseeing your KiwiSaver provider.

My suggestion would be to check with your provider directly to see what they say. Being separated for a prolonged period of time can cause undue stress, financially and otherwise, particularly if you have better employment prospects than your spouse in the U.K.

I expect you've also thought about this too but could you borrow against that money. The banks or most providers are unwilling to do so but perhaps a sympathetic family member (with written guarantee or else heavy resassurance of being paid back) might be willing to help?

I guess the upside of leaving your funds untouched is that you have a small amount of savings to return to one day in New Zealand?  Or maybe if you're lucky, it'll have made some gains in the next 12 months when it comes time to withdrawing it and transferring it to the U.K.
 
Here's what the KiwiSaver Act says on both the hardship issue and permanent emigration.:
 
Good luck.

KiwiSaver Act 2006

Schedule 1

10

Withdrawal in cases of significant financial hardship

(1)

If the trustees are reasonably satisfied that a member is suffering or is likely to suffer from significant financial hardship, the member may, on application to the trustees in accordance with clause 13, make a significant financial hardship withdrawal in accordance with this clause.

(2)

The amount of that significant financial hardship withdrawal may, subject to the trustees' approval under subclause (3), be up to the value of the member's accumulation less the amount of the Crown contribution (disregarding any positive or negative returns for the purpose of calculating the amount of the Crown contribution) on the date of withdrawal.

(3) The trustees—

(a) must be reasonably satisfied that reasonable alternative sources of funding have been explored and have been exhausted; and

(b) may direct that the amount withdrawn be limited to a specified amount that, in the trustees' opinion, is required to alleviate the particular hardship.

 

 

KiwiSaver Act 2006

Schedule 1

14

Withdrawal or transfer to foreign scheme in cases of permanent emigration

 

(1) A member may, on application to the trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme), and no earlier than 1 year after the member’s permanent emigration from New Zealand, withdraw an amount equal to the value of the member’s accumulation less the amount of the Crown contribution arising from a tax credit under section MK 1 of the Income Tax Act 2007 (disregarding any positive or negative returns for the purposes of calculating that amount of Crown contribution) on the date of withdrawal.

 

(2) A member may, on application to the trustees (in the case of a restricted KiwiSaver scheme) or the manager (in the case of any other KiwiSaver scheme), at any time after the member’s permanent emigration from New Zealand, have the trustees or manager (as the case may be) transfer the member’s accumulation less the amount of Crown contribution arising from a tax credit under section MK 1 of the Income Tax Act 2007 (disregarding any positive or negative returns for the purposes of calculating that amount of Crown contribution) to a foreign superannuation scheme authorised for that purpose under regulations made under section 228.

 

(3) An application under subclause (1) or (2) must be in the form required by the trustees or manager (as the case may be) and must include—

 

(a) a completed statutory declaration in respect of the member to the effect that the member has permanently emigrated from New Zealand; and

 

(b) proof to the satisfaction of the trustees or manager (as the case may be)—

 

(i) of the member’s departure from New Zealand (for example, evidence of confirmed travel arrangements, passport evidence, and evidence of any necessary visas); and

 

(ii) that the member has resided at an overseas address at some time during the year following the member’s departure from New Zealand.

 

(4) The trustees or manager (as the case may be) may require that any other documents, things, or information produced in an application under subclause (1) or (2) be verified by oath, statutory declaration, or otherwise.

 

 

Hi, thanks for your email. The schemes you are presumably referring to are called "lifestages" KiwiSaver funds.

Rather than having to chose between a conservative, balanced, moderate, growth or aggressive fund (the five main category of funds on the market) lifestages funds give you an asset allocation that is age specific and self-adjusting.

Modern investment theory has it that the younger you are the greater volatility you can afford to tolerate. Many would argue that is particularly the case with KiwiSaver because it is a retirement saving vehicle and you could be in it for 30 to 40 years if you enroll when you first join the workforce out of college.

While the composition of these funds varies from provider to provider and from fund to fund, in general terms the younger you are the greater exposure you'll most likely have to equities (shares of companies listed on the stock exchange).

That's because according to modern investment theory, equities (over longer periods of time) deliver the highest returns. 

As you get older, these lifestages funds automatically reduce your risk exposure to equities and reinvest a higher overall proportion of your savings into more "conservative" investments, like cash and bonds. The thinking is that the closer you get to retirement age, the less risk you'll want to take with your hard-earning savings if the market had a major meltdown, as it did in 2008.

The huge range of funds on the market (there are in the neighbourhood of 200) can be rather intimidating especially for a first time investor. 

When I first enrolled in KiwiSaver, I opted for one of these lifestages funds myself because I simply didn't have the time or energy to research the full range of offerings on the market. I subsequently ended up shifting because I was unimpressed with the results and my provider who had really poor communication. But that's another story... If you're really interested to hear it, you can read the juicy details here.

While many fund managers stand by the age/risk tolerance theory, there is growing opinion that the old rules and trends upon which asset allocation is structured no longer apply. Also, with people living longer than ever, cash funds delivering negative real returns just won't cut the mustard, or buy bread, for seniors expected to live into their '90s.

I'm not a financial adviser so I can't tell you what to do. Under the new rules,  only an authorised financial adviser whose services you have officially engaged can do that.

What I would encourage you to do before you chose one of these funds is to schedule an appointment with the provider (go in in person) and get one of their authorised financial adviser to break everything down for you. Find how what's in these individual lifestages funds, how well they have performed since KiwiSaver's inception, and how it would work with your individual circumstances.

If you are planning on using KiwiSaver as a platform from which to make a first-time home purchase, it could be that one of these lifestages funds doesn't make sense. Also, it could be that you don't have any appetite for risk or else a high appetite for risk and that the general profiling upon which these lifestages funds are constructed doesn't really meet your needs.

It's all a bit overwhelming but given that KiwiSaver could be your main retirement savings vehicle, the sooner you get a handle on how it all works, what you are invested in, and whose managing your money the better.

Neutral advice

An independent financial adviser will also be able to give you some neutral advice and look at your global circumstances to determine which KiwiSaver fund would best suit you.

But going back to your original question, we have a list of the lifestages funds listed on our website under our KiwiSaver section viewable here.

What you'll also find listed beside them is something called the growth asset percentage (GAP), expense ratio and performance, one, two and three year.

In case you are not familiar with these terms I'll explain briefly.

The GAP is our in-house way of expressing how much exposure a particular fund has to high risk assets. The higher the number the greater the potential volatility.  The older you get the less risk you'll want to be taking with your fund because of the likelihood of needing that money. 

The expense ratio is what we calculate as the relative cost of all the fees and expenses you'll pay to have your fund managed. Typically, the higher the GAP, the higher the expense ratio because in theory you are paying someone skilled to manage that risk and minimise your prospects of losing money.

KiwiSaver writer Mary Holm is big on fees and suggests they should be one of the main criteria for choosing a KiwiSaver fund. Just as your funds grow exponentially over time, so too do fees, which is easy to forget sometimes.  It's important to bear that in mind as part of any decision on which KiwiSaver to invest in. (To see how much you can end up paying in fees over a life-time of invested check out this fees calculator on sorted.org.nz)

And finally performance. Performance is hugely controversial in KiwiSaver because as yet there are no universal reporting standards to ensure a level playing field among providers. That should change next year when new rules regarding KiwiSaver are introduced with respect disclosure and reporting. 

In the meantime, you can get a general sense of how well your fund has done by comparing it to its peers, using the same reporting time frame as a measure.  On our performance ranking tables here, we have one, two and three year annualised returns, after fees but before tax.

If you look at our one year results, that's the 12-month period taken from the most recent quarterly reports (ending June 30, 2011) then going back. Two years, would be two years from June 30, 2011 working back again, and the same with the three-year.

Depending on what time frame you choose, the results can be dramatically different. That's because, how your fund will have performed depends to a high degree on what the markets did that past year. You'll be well aware of the market rollercoaster since KiwiSaver was first launched in 2007.

Fund managers have different styles and different thoughts on performance benchmarking and how to read it but again as a general rule, the longer the fund has to run, the more can be gleaned from how it is tracking and how your fund manager is performing. (See also our investment management 101 series by Kevin Mitchelson).

For more KiwiSaver fun, check our retirement calculator here . It'll give a better sense of how variable your nestegg is depending on the various factors discussed above. 

All useful information and resources to bear in mind as you move along in your KiwiSaver journey. 

Hi, thanks for writing and give my regards to the motherland. Your question is bound to be of interest to other international ex-pats who don't see themselves retiring in New Zealand.

Once you make a permanent move from New Zealand, you have two options with respect to your KiwiSaver. You can leave your funds invested and wait till you reach 65 or else cash in your account now.

I'll address this last one first.

If you should find yourself in need of that money, you'll be eligible to withdraw all your contributions, your employer contributions and whatever gains they've made, less the government's share. You'll be able to keep the kick-start but the member tax credits go back to Government.

You'll find some detail on Inland Revenue's KiwiSaver website here.  In brief, you'll need a statutory declaration confirming that you have left the country permanently. You'll also require evidence of it in the form of boarding passes and the like, passport records and proof of address at your new residence.

Going back to your question about making contributions retroactively on the assumption that you want to keep your money in KiwiSaver until you reach the age of eligibility: I checked with Inland Revenue which confirmed that you can in fact continue to making voluntary contributions. They won't be backdated to that year that you missed, but that won't make a difference.

With respect to those mysterious government contributions for the year you skipped, IRD claimed this is an impossibility. Don't worry, I didn't give them your name. They insisted member tax credits are paid only on the basis of payments that you make yourself so were confused by the question. In any case, if you are keen to keep investing (considering it part of a diversification strategy) you'll be doing it on your own steam. Government contributions only feed through if you're living and working in New Zealand and paying into the scheme through the PAYE system, you'll remember that.

What you may want to look into from your end is the tax handling of KiwiSaver. Canada and New Zealand have a double tax agreement in place so you won't be charged twice on your investment but the rules tend to get a little blurry around the issue of foreign investment funds. In New Zealand, some foreign pensions are regarded as income and therefore taxed that way, when you bring the money over. (See "What the F.I.F is going on" by our tax columnist Terry Baucher.'')

Whether Canada Revenue Agency will see your KiwiSaver fund in the same light, I'm not sure. You get taxed along the way with KiwiSaver, and so when it comes time to withdrawing the funds, the redemption is supposed to be tax free, here.

Unless you're keeping up with the news from afar, there some talk here in New Zealand about introducing a capital gains tax. Unless National is ousted from Government it won't stand a chance however if Labour should happen to win the election, capital gains could be on the radar, KiwiSaver gains included, potentially.

Personally, I can't see KiwiSaver getting nailed with capital gains, given that it is taxed already along the way. But never say never.

Canadian pensions work differently from KiwiSaver.  There you can invest 18% of your gross salary into a retirement saving plan (up to $22,000) and not get taxed on it. It's an incentive to self-fund your retirement. It also has the effect of offsetting the tax you pay on your income. Where you get hit is at the time of retirement.

If you don't want any big surprises best to get this sussed out sooner than later. It might may more sense to take your money out now, while the Kiwi dollar is still high and reinvest it in a RSP back home. Just a thought. I'm not a financial adviser.

And as a final note, if you do decide the grass is greener back in NZ and want to get back into your KiwiSaver, after having closed it out, you'll be free to do so but that kick-start is a one-time deal.

Hi. I'm a bit late responding to your question and I'm really hoping that you had this sussed before your first day of work as it's a matter that should have been ironed out well before hand.

Technically speaking, employers are required to pay KiwiSaver contributions on top of salary AND commissions if you have an employer/employee relationship as defined by the use of the PAYE system.  If you are a contractor, then compulsory employer KiwiSaver obligations won't likely apply.

That said, even as a commission-based PAYE processed employee, it is still possible you might not be eligible for KiwiSaver contributions. Through something called "good faith" bargaining, KiwiSaver contributions are not necessarily compulsory for your employer if you have an agreement to that effect -- in advance of  you starting work.

The KiwiSaver Act (as it stands) allows for employers and employees to strike a deal outside of KiwiSaver, so you can negotiate higher pay in lieu of, or more time off in lieu of, or free child-care or what have you. Oops, I must be dreaming about that last part, but you get my drift.  The Act allows for some flexibility but this is not a one-way street. Everything needs to be on the table, discussed and agreed to,up front, by both parties.

If you are being paid through the PAYE system and you are on a commission and you didn't expressly have this conversation, I am told that the "default" position would direct your employer to pay on top of commissions. As for the amount, the minimum baseline of 2% would still apply.

I consulted with Workplace Savings NZ  chairman David Ireland who advises that the amount would fluctuate along side what you are earning - which bodes well if you are good at your job.

Ireland's advice for both you and your employer?

"You just want to be absolutely clear before you commence the relationship exactly what the implications are going to be from KiwiSaver.''

Even for salaried employees, clarity around that issue is going to become increasingly important.

That's because starting in April 2013, employers compulsory contributions will be increasing to 3% to compensate for declining Member Tax Credits which this month reduce to $10 a week up to a maximum of $521a year.

I'm guessing if you are a shrewd salesman or saleswoman, your employer is unlikely to want to be paying 3% on top of commissions but perhaps you'll have earned that so they won't mind in any event. The key is obviously knowing what the deal is before you go about business.

If you're looking for a free and second opinion on all this, best to check with your KiwiSaver provider. Ask to speak to one of their Authorised Financial Advisers. In theory, an AFA has more schooling and experience so should be better able to advise you on this matter.

Here's some links that you might find helpful in this regard.

Inland Revenue on Budget 2011 changes.

Department of Labour

KiwiSaver Act (on compulsory contributions for employers)

Compulsory contributions must be paid on top of gross salary or wages except to extent that parties otherwise agree after 13 December 2007
  • (1) The purpose of this section is to ensure that, for contractual arrangements of parties to an employment relationship (as defined in section 4(2) of the Employment Relations Act 2000), compulsory contributions are paid in addition to an employee’s gross salary or wages described in section 101D(3).

    (2) The contractual arrangements of parties to an employment relationship must not have the effect of defeating the purpose of this section described in subsection (1).

    (3) A contractual term or condition has no effect to the extent to which it is contrary to the purpose of this section described in subsection (1).

    (4) However, on and after 13 December 2007, parties to an employment relationship are free to agree contractual terms and conditions that disregard the purpose of this section described in subsection (1), and, to the extent of such agreement, subsections (1) to (3) do not apply, unless, in respect of the employer and employee,—

    • (b) the contractual terms and conditions do not account for the amount of compulsory contributions the employer is required to pay.

    (4A) In the circumstances described in subsection (4)(a) and (b), despite subsection (4),—

    • (a) compulsory contributions must be paid in addition to an employee’s gross salary or wages described in section 101D(3), in accordance with the purpose of this section described in subsection (1); and

    • (b) subsections (2) and (3) apply.

    (5) For the avoidance of doubt,—

    • (a) the duty of good faith described in section 4 of the Employment Relations Act 2000 always applies when parties to an employment relationship bargain for terms and conditions relating to compulsory contributions and associated matters; and

    • (b) [Repealed]

    (6) In this section, compulsory contributions means an amount of employer contributions equal to the amount of compulsory employer contributions that would be required by this subpart in the absence of section 101D(5)(a).

    Section 101B: inserted, on 1 April 2008, by section 65 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

    Section 101B(4): substituted, on 15 December 2008, by section 47 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 101B(4A): inserted, on 15 December 2008, by section 47 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 101B(5): substituted, on 10 September 2008, by section 10 of the Employment Relations (Breaks, Infant Feeding, and Other Matters) Amendment Act 2008 (2008 No 58).

    Section 101B(5)(b): repealed, on 16 December 2008, by section 10 of the Employment Relations Amendment Act 2008 (2008 No 106).

 

You're not alone in thinking you might be better off getting the mortgage monkey off your back before you pursue other investments more seriously. While that strategy can be effective, many would argue that retirement savings deserves a front-seat in your financial plan as well.

The argument for keeping up those KiwiSaver contributions, alongside mortgage repayment, is particularly strong in your case because of the generous top-up you are receiving from your employer.

In any event, I took your question to an authorised financial adviser so you could have the benefit of an expert opinion on this one.

But first, for the benefit or other readers, lets review your circumstances: You're a 48-year-old employee in KiwiSaver. You are invested in an aggressive fund with AMP. You're making personal contributions of 7.5% of your pay on annual basis and your employer is matching you. You have a revolving credit mortgage of $365,000 with an interest rate of 5.4%.

Nigel Tate, with Nigel Tate Financial Planning Ltd in Hamilton, broke your question into two parts: 1) whether you'd be better off taking a KiwiSaver holiday and channeling that money onto the mortgage and 2) whether you are invested in the right fund.

Let's look at the first one.

You'll be well aware that most employers contribute only 2% of gross pay to KiwiSaver, so the 7.5% you are receiving from your employer is exceptional. Sacrificing those bonus investment dollars for the sake of your mortgage doesn't make sense, the way Tate sees it.

Even with employer's contributions getting taxed next year, you're still getting a huge amount of money that you presumably would not be getting if you took a KiwiSaver holiday. The other point Tate makes on the mortgage diversion option, is that you'd be increasing your risk exposure to an illiquid asset.

"Contributions to Kiwisaver with employer support at the level gained in this situation, is extremely beneficial and it is likely to be imprudent to simply focus on debt reduction at the expense of the $26,000 contributed by his employer. By diverting his contributions to his mortgage would in fact increase his overall risk exposure to illiquid assets (his property).''

He makes a good point however I would point out that many people also see KiwiSaver as an illiquid investment as well, on the ground that you can't touch it until you're 65. Okay, so technically speaking that money is more fluid because it's in equities but you get my drift. It's hands off until you throw in your hat at work in 17 years time or so.

With respect to whether you are in the right KiwiSaver fund, Tate suggests it is not so much which fund you are in that matters but the fact that you're in one at all.

"It is imperative that clients needs are met with any KiwiSaver plan and whilst at present the fact that you contribute is of far greater importance than which fund your are in as the amounts at this stage are reasonably low. The fund would need to be losing 50% per annum for the client to be losing any of his contribution in effect."

That may be cold comfort in the face of unimpressive returns on your KiwiSaver. 

Tate suggests you're probably an ideal candidate for a financial adviser, given your earning ability and income, and your proximity to retirement age. Now is the time to review your circumstances in earnest and get organised for retirement.

Part of that exercise would entail a review of your risk profile and your cash flow requirements now and going forward.

Tate suggests this would allow you set your priorities and risk tolerances to suit your needs.

It could also be you are more loss averse than risk averse, which is important to determine, he argues.

For your money, a financial adviser will give you guidance on this but how about pushing your provider for some answers too. Under the new regulatory environment in New Zealand, KiwiSaver salesmen and saleswomen are expected to be authorised financial advisers (AFA). That means they have the same qualifications as financial advisers giving personalised investment advice, or that's my read of the situation.

How about getting on the horn and asking to speak with an AFA employed by your provider. They should be able to put you through a risk profile questionnaire to determine whether you properly belong in an aggressive fund. They should also be able to explain, or at least rationalise, what's going on with the fund and why it's not doing so hot. 

Sure, they may give a big sigh or huff about being put to work on this, but remember you are paying these guys to manage your money so why not hold them to account for it?

Going back to your original question, Tate concludes that you're long-term better off maintaining your KiwiSaver contributions and if you have any spare income left-over after that, throw that onto the mortgage as well.

Thanks for your question. As I am not an authorised financial advisor, I can not give you advice per se on what KiwiSaver fund would be best for you given your short time frame for investment. As you are probably already aware, you are entitled to withdraw your funds if you leave the country permanently although you'll

 

ime in New Zealand will be briefly.

 

 

 

 

I am assuming that you have New Zealand residency and are thus able to qualify for KiwiSaver. Leaving the country permanently is not an obstacle to retrieving your funds but you do have to provide documentary evidence of that.

 

 

 

 

The short answer to your question is, don't bank on your KiwiSaver money to cover your funeral costs. While I understand the process of withdrawing your funds can happen fairly quickly if you have all your ducks in row, it's unrealistic to expect that to happen in time for your funeral, which is usually a few days after death.

I consulted with one provider to get a rough idea of time but they couldn't give a definitive answer as it depends on your circumstances.

If you have more than NZ$15,000 in your KiwiSaver account, the money will be subject to probate as it will form part of your estate. If you don't have a will, you'll need a letter of administration. Dying intestate presents all manner of issues which can be time consuming and costly to resolve so hopefully you've got that one sorted.

If you have less than NZ$15,000 in your KiwiSaver account, then probate is one less obstacle to getting at the money. If you want to be organised about this (and it sounds as if you do), pay your provider a visit and review what's expected of you. It sounds like you can do a bit of prep work here and have everything ready to go in advance, to minimise the amount of work involved for your grieving spouse. In addition to the standard application form (which has to be notorised), your wife or another party acting on your behalf, will have to supply a copy of your death certificate.

If your wife is already losing sleep over this one, it is probably a good idea to review with your provider your circumstances and discuss what will be required of you, so there's no surprises and unnecessary hold ups in the event of your death. Pricing out a funeral that you can afford is also a good idea, if you haven't already looked into that one.

Not exactly uplifting phone calls to make I know but it may bring some peace of mind just knowing what's involved. I remember having to make a few of these calls on behalf of my late grandmother and it wasn't easy.

For what it's worth, here's what the withdrawal form (in the event of death) looks like for Fisher Funds, just so you can get a sense of what kind of information you'll be asked to supply.

Just as an aside, maybe it would be worth looking into withdrawing your funds (while you're still alive) so you have that money ready to go in advance. Serious illness is one of the conditions for early withdrawal of your funds. Not sure what your health status is, but it's possible you could qualify for this one. See Inland Revenue's KiwiSaver website for their content on "serious illness.''

It says on the website you can "withdraw the total funds in your account, including the current value of:

  • your contributions
  • your employer's contributions
  • the $1,000 kick-start
  • any member tax credits.

Maybe this option would suit you better? Check with your provider to see what's involved.

Live fully while you can.

 

 

Two retirement savings schemes huh? Good on ya and having those above average contributions from your employer is a bonus. With respect to your separate KiwiSaver plan, you are correct in your assessment about your member tax credits being reduced from their present value by 50%. Currently, if you're making those $20 a week payments from your pay packet, Government is matching them dollar for dollar up to a maxiumum of $1,043 a year. That will change next month as a result of National's changes to KiwiSaver announced as part of Budget 2011. While you won't actually receive the member tax credit for a full year, the reduced payments will begin to be calculated on a $10 a week maximum basis effective July 1.

You asked a similar question about contributions you are making on behalf of a relative who is on an invalid's benefit. Wish I could say you'd be rewarded for that gesture with some kind of bonus points from Government but the member tax credits are essentially the same as what I've described above. So if you continue to make the maximum payments there, Government will meet you half way now, at $521 maximum per year starting next month.

Save and prosper.

 

 

 

Sounds like you're getting itchy feet about KiwiSaver. You're not alone.

As of the end of May (the most recent statistics available), a total of 230,589 248,241* KiwiSavers have either closed out their accounts or opted out of the scheme and another 61,332 are on active holidays or have withdrawn their funds due to "significant financial hardship).

That represents more than one in eight KiwiSavers either closing out of backing out of KiwiSaver, plus another 3.5% that for whatever reasons are not contributing to their accounts.

You probably don't need to be reminded of this but KiwiSaver is meant to be your retirement savings fund. As such, it's deliberately set up to be difficult to get out of. 

That said there are few get out-of-KiwiSaver scenarios where this is feasible. The Christchurch earthquake is one of them. Because of the financial hardship arising from the disaster,  Government has mandated that applications made on these grounds are dealt with expeditiously and with minimal hassle. 

The earthquake is not a special scenario per se, but rather falls under the category of "significant financial hardship" one of the four scenarios where KiwiSaver funds can be access.

The other situations are: "serious illness", a permanent move overseas, and purchase of a first time home.

I haven't heard directly from anyone who has gone through the process but  it is rumored to be hard work.

You can't just rock-up to your provider and tell them you want out because you're struggling that month and KiwiSaver is cutting into your holiday savings fund. You're required to provide all sorts of documention to demonstrate genuine financial hardship and a determination as to the authenticity of your case is made by the provider's trustee on a case by case basis, which can be subjective.

Buying a home, if you're a first time home buyer, is also a process that is somewhat fraught due to the technicalities and requires some research well in advance. That's due in part to the fact that the funds only get released once the sale has gone unconditional, or so that's what one provider told me.

The rules may differ slightly with some of the providers out there, particularly if you are planning on taking out a mortgage with the same provider (if they are a bank) so do your homework on that one before you place an offer. (See Amanda Morrall article on criticism about lack of transparency on first-time home buying through KiwiSaver.)

To access your provider's investment statements and information on first time home deposit, look up your scheme on our KiwiSaver section and click on the green arrow to open its investment statement.

In general terms, to be eligible to withdraw KiwiSaver funds and use them towards the purchase of a first home, members have been enrolled for a minimum of three years. The same requirement exists for the those interested in the HCNZ first time home deposit subsidy, although the qualifying criteria goes beyond that.

In terms, of the amount you can withdraw, there is no limit (so far) which is handy but you will forfeit the Member Tax Credits (MTC) that Government put in on your behalf plus the $1,000 kick start. (See example below for how much a couple could potentially bank and use towards their first-time home). And for other KiwiSaver case studies modelled on Budget 2011 changes, see this link.

I guess the upside of National's halving of the MTC as of next month is that going forward there will be less money stuck in the account to be frustrated about being locked in if you go that route. Also, looking positively at that policy, you'll at least have something left in that account to gain some interest.

Here's the link to Inland Revenue's KiwiSaver website where they outline, in very general terms, criteria for first-time home buying.

You asked about starting a business. This is an interesting one.

In the United States, there is a provision for borrowing against a 401K, the American equivalent of KiwiSaver.

I didn't have time to canvass all the providers here in New Zealand whether this was possible.

Of those that are still looking into the issue for me, their initial response - my words, not in theirs: "Not bloody likely mate.''

Graham Duston, executive director of Funds Administration for SBS, was more definitive on the question. He said as there was "no scope in the current legislation to allow for loans against your account" you would not be able to use your KiwiSaver scheme as collateral.

Whether this will change over time, is anyone guess. National hasn't closed the books on further changes to KiwiSaver so going forward, perhaps we'll see greater flexibility of access either for a good business case or perhaps borrowing on a university education?

*Corrected figure from Inland Revenue

 

 30-year old couple each earning $45,000, contributing 4 per cent and intending to use the first home buyer subsidy*

Bechi and Dan are both 30 and each earn $45,000 a year. They both join KiwiSaver on 1 April 2013 and choose to contribute 4 per cent of their gross wage – $34.52 a week each. Their employers contribute 3 per cent, or $21.36 after tax. They each receive the equivalent of $10 a week from the Member Tax Credit.

After three years, if Bechi and Dan decided to buy their first home, they may be eligible for a first home deposit subsidy of $3,000 each, which increases to a maximum of $5,000 after five years. They could also withdraw their own contributions, their employers' contributions and their fund returns to buy their first home. After five years they would have about $36,000 available for withdrawal, and if their combined income remained under $100,000, they would also be eligible for the $5,000 deposit subsidy, pushing their total first-home deposit to about $46,000.

Assuming they withdrew the maximum amount to buy their first home, at age 65 Bechi and Dan would have a combined balance of about $345,000, which would be enough to provide gross income of about $21,000 a year in retirement over and above the married rate of NZ Superannuation – currently $27,194 a year after tax.

*Source National's KiwiSaver modelling under Budget 2011

 

Performance of managed funds is a sticky issue and depends on a number of factors including time frame for investment, your risk appetite, fees and taxes.

I need to state upfront that I am not an Authorised Financial Adviser which, by law, is the only person who is eligible to give you personalised advice on this subject matter.

As a journalist and an entry-level investor myself, I can speak in general terms and also share with you what I have learned along the way.

"Aggressive" or "growth" funds, like the one you are in, have a higher weighting of equities and are therefore more volatile, which means you are very much at the mercy of the markets. I'm not sure when you first signed up with your provider but the fact that you haven't seen much movement could be that it is still early days.

Also, as you don't have the benefit of employer contributions, you are more disadvantaged in terms of the amount of those regular contributions going into your KiwiSaver account. With National's proposed changes to KiwiSaver (one of which will begin next month) it could be that KiwiSaver does not make as much sense for you as it used to with Member Tax Credits being cut in half. This is something you should look into closer.

In terms of how long you should wait to see a satisfactory performance, the answer will vary depending on who you talk to. I put that same question to Australia fund manager Kerr Neilson a few years ago (this guy is regarded as an industry "rock start" because his active management style has resulted in consistent above average returns over the years - close to 14%!). He suggested that you could not properly judge the performance of a fund manager (at least those who aim to achieve higher than normal returns) for at least five years. In fact, he suggested a meaningful track record could only really be established after seven or 10 years. 

That may not be of much comfort if you are watching your funds go nowhere while they get eaten away by tax, fees and inflation and similarly with your partner's. I've personally seen a 5% slide in a ""growth" fund that I own and have been wondering whether to pull the plug myself. I raised the issue recently with a fund manager acquaintance who laughed and said if I could not tolerate a 5% risk then I should not be investing. The remark smarted but they made a good point probably. Investing is a form of gambling really but it's a calculate risk. With the fund you are in, you are sitting at the craps table I reckon, not that that makes it any better when you get crap returns.

If you are invested in an aggressive fund, it is because you have made a conscious choice to gun for higher returns and accept the risk of higher volatility. I don't know your age or how far away you are from retirement but that's something that hopefully was taken into consideration as part of your decision to be in this fund. Your provider (or a financial adviser) should have spelled that out for you before you ticked this box.

If not, don't beat yourself up it. I signed up both my children to growth funds (with the assumption they had plenty of time to ride out volatility) and was told (in hindsight) by the provider all sorts of stuff about the fund that they suggested was well articulated in advance to anyone who signed up. I had no intelligent guidance and made the decision more or less around the fact that it was billed as a socially responsible investment, the intergrity of which I now seriously question.

If you don't have someone whom you respect, trust and feel is well qualified to give you guidance on this issue, I would suggest pressing your provider for answers. Why not make them work for their money? Aggressive funds normally have higher fees so as you are paying for the privilege of ostensibly earning higher returns, I think you're within your rights to hold them to account and else cough up some answers that make sense to you.

They might give you short shift but in my experience you need to make the extra effort, phone call or visit to get some answers. Personally, I wouldn't settle for a phone call. I have yet to be impressed by the quality of service and advice I have received over the phone in speaking to a provider.

And here's another thought. If you are contemplating shifting providers, go pay that prospective provider a visit in advance, ask to see one of their Authorised Financial Adviser so you can get their opinion on the issue. If they're hungry for your business, which they should be as this is proving to be an increasingly competitive market with KiwiSaver funds going up in value, they should be prepared to give you some time and make some recommendations. Make sure you ask about the self-employment bit.

With the new financial regulations in place, someone with an AFA, should (in theory) be well placed to advise whether an aggressive fund is right for you and whether the returns it has delivered thus far are adequate. Don't settle for a registered adviser, as there would appear to be some instances where an RA is legally allowed to act as a KiwiSaver sales agent.

All this takes time and effort but if you go through this exercise with your current provider and a prospective one, I'm guessing you'll at least come away feeling a bit more knowledgeable and more in control of your fund.

I'd recommend your partner do the same thing particularly if her fund is losing money and has been for several years. A financial adviser would probably be the ideal candidate as they would -- or should -- examine your KiwiSaver fund as part of an overall financial plan.

KiwiSaver is just one piece of a financial puzzle and it is a long-term savings vehicle which is important to bear in mind in the context of performance. (See the Institute of Financial Adviser's website here for tips on how to choose a financial adviser).

I hope this provides some food for thought.

 

 

 

It is listed.

Look under Schemes and you will find it.

The funds do not appear in the performance comparision tables as they do not supply pre tax performance date.

Regards, Kevin

 

Hi. Congratulations on the news and thanks for raising a good question.  I imagine other expectant mothers (and other working women considering motherhood) will be keen to know where they stand with KiwiSaver when baby arrives on scene.

I checked with Inland Revenue to get some clarification on the rules regarding Paid Parental Leave and KiwiSaver contributions so my answer below was guided by their official response.

There are a few  different scenarios that kick-in on maternity leave. As I don't know what your personal situation is, I'll outline them all.

Unless you negotiated a contract where your employer will continue paying you while you're on maternity leave, your KiwiSaver contributions will automatically cease unless you specify otherwise. You'll need to take the intiative with this. You were right about the KS 2 form. For the benefit of others reading this, here's the link to how to go about that.

If you decide to continue making KiwiSaver contributions, the Government will reward you by pitching in Member Tax Credits on your behalf. For the rest of this month (June 2011) you'll continue to receive matching credits up to a maximum of $20 a week. Starting July 1, those matching contributions from Government will be cut in half (to a maximum of  $10 a week) as per National's Budget 2011 announcement. As the payments are made once year, Government contributions (at the lower new rate) won't be paid to your provider until June 30, 2012 but they'll be calculated at the lower rate starting next month.

With Paid Parental Leave, Government will compensate for salary loss but it won't compensate for whatever contributions you'll lose from your employer by leaving the workplace.

However, as mentioned above, if you negotiated a paid maternity leave situation with your employer (that is in addition to Government support) then in theory your KiwiSaver contributions will continue from your employer. This would depend on your individual contract.

That said, there is nothing stopping employers from making "voluntary contributions" on your behalf whilst you are away on parental leave in which case your overall contributions to your savings wouldn't be dramatically affected. At least that would be the case if you continued making your voluntary contributions (triggering the Member Tax Credit) as well and were receiving the bonus benefit of employer contributions.

Whether it would make sense to continue making contributions while you're out of the workplace would depend on a few things includings a) your financial ability to do so and b) your overall financial situation including debt, mortgages and other responsibilities and c) your long-term plans and goals.

Planned parenting (that includes a heavy dose of financial planning) will undoubtedly alleviate a lot of stress. (Here's a few articles on the subject: "Bringing up Baby, it ain't cheap" by Janine Starks and "A costly wee bundle of joy" by yours truly).

Shrewd wage bargainining could prove a formative part of that plan, particularly with compulsory contributions increasing to 3% in 2013. Employers, understandably, will be looking to offload that expense by folding the added expense into a smaller salary. (See previous posting on the subject).

One would imagine that smart employers will do what they can to retain top talent and if that means KiwiSaver contributions (baby or no baby) on top of salary or as part of a negotiated package so be it. Oppositely, smart employees would do well to bring this item to the negotiating table early (when there is still good will and room to manoeuver) before the bump begins to show.

Don't lose any less sleep than you have to as a new mother. Get it sorted before hand. If not for No. 1, then definitely No.2.

Do you have a KiwiSaver question? Send us an email and we'll do our best to answer it.

Amanda

 

Thanks for your question.

I am guessing, as this is the second question on the subject, there are more than a few employees or else employers who are confused about contributions obligations.  You asked for legislative evidence that employers are required to chip in 2% of salary which obviously carries most weight if push came to shove and you ended up in a nasty debate over this one with an employee or employer.

I admit that when I went into the Act, it didn't exactly jump out. So I went to Inland Revenue and well, it didn't exactly jump out for them either at least not at first.  That could have something to do with tinkering of the law. The legislative support for compulsory contributions on behalf of the employer (on top of salary) got written into the 2006 Act two years later, to reflect a election promise by National.

The specific section of the Act you're after is 101B. I've cut and paste it and put it at the bottom of this entry along with a link to the Act in full. Like most legal documents, the small print is a) hard to read and b) somewhat ambiguous. It will pay to crack out your bifocals and take time to read the relevant section and then phone an employment lawyer if there's some grey area.

While the Act (by virtue of the 2008 amendment) does indeed specify that employer contributions must be on top of salary there is also a bit (number 4 in 101B) that essentially throws that protection out of the window.

That part relates to "good faith bargaining" allowing employees and employers some room to negotiate on salary and contributions.

An IRD spokesman offered the following scenario:

"For example, an employee and employer could agree in advance to arrangements where a “superannuation allowance” can be taken in cash or treated as employer KiwiSaver contributions, and so if an employee should later join KiwiSaver the “superannuation allowance” would then be the employer’s compulsory KiwiSaver contribution.''

The key part to be aware of is the "good faith" principle which underscores these contractual negotiations under the referenced Section 4 of Employment Relations Act.  Also the word ADVANCE. These discussions need to take place in advance of any concessions on KiwiSaver being meted out in pay and with both parties in agreement.

There are some exemptions where employers are not required to pay contributions and I outlined them in the previous Q&A. In brief here they are again: 

 

  • if they're already paying into another eligible registered superannuation scheme.
  • if the KiwiSaver is under the age of 18
  • if you are over 65 years of age (and you've been a member for more than five years)
  • if the employee is not making contributions

You can read the details on Inland Revenue's website

In a nutshell, here's what the their website says on compulsory contributions in simple terms.

Your employer's compulsory contributions must be on top of your regular pay. This means that if you have agreed to a total remuneration package, the compulsory employer contributions must be paid on top of that package. Your take-home pay should not be reduced because your employer is making a compulsory contribution.

Through good faith bargaining, a salary package under an employment agreement can be negotiated whereby compulsory employer contributions can be offset against the employee's gross pay.

For more information please read the Department of Labour fact sheet.

Inland Revenue can only send your employer's compulsory contributions to your KiwiSaver provider if they've received the money from your employer.

Section 96 of the KiwiSaver Act 2006 governs payments from the Commissioner to the provider.

KiwiSaver Act 2006 (as of May 1, 2011) 

 

 

 Compulsory contributions must be paid on top of gross salary or wages except to extent that parties otherwise agree after 13 December 2007
  • (1) The purpose of this section is to ensure that, for contractual arrangements of parties to an employment relationship (as defined in section 4(2) of the Employment Relations Act 2000), compulsory contributions are paid in addition to an employee’s gross salary or wages described in section 101D(3).

    (2) The contractual arrangements of parties to an employment relationship must not have the effect of defeating the purpose of this section described in subsection (1).

    (3) A contractual term or condition has no effect to the extent to which it is contrary to the purpose of this section described in subsection (1).

    (4) However, on and after 13 December 2007, parties to an employment relationship are free to agree contractual terms and conditions that disregard the purpose of this section described in subsection (1), and, to the extent of such agreement, subsections (1) to (3) do not apply, unless, in respect of the employer and employee,—

    • (b) the contractual terms and conditions do not account for the amount of compulsory contributions the employer is required to pay.

    (4A) In the circumstances described in subsection (4)(a) and (b), despite subsection (4),—

    • (a) compulsory contributions must be paid in addition to an employee’s gross salary or wages described in section 101D(3), in accordance with the purpose of this section described in subsection (1); and

    • (b) subsections (2) and (3) apply.

    (5) For the avoidance of doubt,—

    • (a) the duty of good faith described in section 4 of the Employment Relations Act 2000 always applies when parties to an employment relationship bargain for terms and conditions relating to compulsory contributions and associated matters; and

    • (b) [Repealed]

    (6) In this section, compulsory contributions means an amount of employer contributions equal to the amount of compulsory employer contributions that would be required by this subpart in the absence of section 101D(5)(a).

    Section 101B: inserted, on 1 April 2008, by section 65 of the Taxation (KiwiSaver) Act 2007 (2007 No 110).

    Section 101B(4): substituted, on 15 December 2008, by section 47 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 101B(4A): inserted, on 15 December 2008, by section 47 of the Taxation (Urgent Measures and Annual Rates) Act 2008 (2008 No 105).

    Section 101B(5): substituted, on 10 September 2008, by section 10 of the Employment Relations (Breaks, Infant Feeding, and Other Matters) Amendment Act 2008 (2008 No 58).

    Section 101B(5)(b): repealed, on 16 December 2008, by section 10 of the Employment Relations Amendment Act 2008 (2008 No 106).

Thanks for your question.

Under proposed changes to KiwiSaver announced as part of  Budget 2011, Member Tax Credits will be cut by 50% (assuming National is re-elected).

Government pays out the MTCs on an annual basis and the targetted date for the first reduced payment is June 30, 2012. So technically, it would appear that the reduced amounts start taking effect this July with the former maxium amounts of $1,043 being paid to KiwiSaver accounts end of June.

The other dates of note with respect to major KiwiSaver changes are April 1, 2012 and April 1, 2013.

The former is when Government will start taxing your employer contributions. Previously, they have been tax free, a nice perk for your KiwiSaver account. Those contributions will next year be taxed at the marginal tax rate.

Government's rationale for cutting this sweetener was that half the benefit was going to the top 15% of income earners, who got a larger tax break due to their higher marginal income tax rate.

The following April, in 2013, is when your contributions will automatically go up to 3% from 2%. The same goes for employer contributions. The idea is that by raising contributions from your own earnings, you'll be able to compensate for the decreasing benefit from Government, effectively saving more.

You can read more on the policy changes on the official KiwiSaver website here:

National also produced some tables that show the long-term effect of KiwiSaver changes based on income and contributions which are worth a look and can be seen here.

Here's one example:

If you were earning $60K a year now and made 2% contributions of $23.01 a week, you would receive in matching contributions $23.01 from your employer and an extra $20 a week from Government in Member Tax Credits. Skip ahead to April, 2013 and your 3% contributions works out to $34.52 a week and your employers is down $24.16 (because it is now taxed) and your Member Tax Credit falls to $10 a week.

You can also tailor the numbers to your own situation by using the updated KiwiSaver calculator on sorted.org.nz's website. It will show you the varying projections based on contributions of 2%, 4%, or 8%. I'd read the assumptions upon which their projections are based in the fine-print below the calculator.

It assumes annual wage growth of 3.5%, which is questionable, in my humble opinion.

Mercer has today announced the results of its latest pay trends survey, which shows that despite a rising cost of living, New Zealand salary increases have stalled at 2.5% over the past six months and are not expected to rise over the next year.

Although National is forecasting wage growth of 4.5%, international consultancy firm Mercer reported last month that salary increases in New Zealand have stalled at 2.5% over the past six months. It also said salaries were not expected to rise over the next year. With inflation is running at 4.5% (due to the GST) that makes some of those calculations suspect.

I'm also including a link to National's KiwiSaver scenarios (reflecting the Budget 2011) changes. Also worth a peek.  You can see them  here.

I hope this is helpful.

If you have a question about KiwiSaver, please send us an email, your anonymity is guaranteed.

Amanda

 

 

 

There are 2 funds thaat allow you a degree of choice over where your contributions get invested.

Foryth Barr's Personal Choice Fund and Craig's Kiwistart Personalised Scheme.

The latter gives you more flexibilty.

You can see the investment statements from the Scheme page.

Cheers, Kevin

 

In short, no this is not legal.

The KiwiSaver Act specifically condemns this sort of nonsense.

Employer's KiwiSaver contributions are supposed to be on top of regular pay unless your daughter agreed (through "good faith bargaining") to a reduced wage or salary in lieu of KiwiSaver contributions as part of an employment package.

This is a direct quote from Inland Revenue:

"Your take-home pay should not be reduced because your employer is making a compulsory contribution."

That said there are a few situations whereby employers are exempt from making contributions. They are as follows:

  • if they're already paying into another eligible registered superannuation scheme.
  • if the KiwiSaver is under the age of 18
  • if you are over 65 years of age (and you've been a member for more than five years)
  • if the employee is not making contributions

You can read the details on Inland Revenue's website

Here's some more information below from the Department of Labour's website on deductions which suggests that you're daughter might also have had to sign off on any paperwork agreeing to a reduced salary in lieu of contributions.

As a fresh hire, you daughter won't likely want to rock the boat but I'm sure she'll miss the $700 a year extra more than her employer will.

(See our KiwiSaver retirement calculator here).

Armed with the right paperwork and approach, she should be able to set the record straight.

Employers generally can’t make deductions (take money) from employees’ wages. Employers can only do this where:

  • an employee has agreed to or requested the deduction in writing. The employee can vary or withdraw this consent by giving notice in writing at any time. The employer must then vary or stop the deductions within two weeks of receiving the notice or as soon as practicable
  • an employment agreement says the money can be taken out (for example, for union fees in a collective agreement)
  • an employer wishes to recover overpayments where the employee has been absent from work without the employer's authority, been on strike, locked out or suspended. The employer may only recover an overpayment where it was not reasonably practicable to avoid making the overpayment. The employer must tell the employee of their intention to recover the overpayment before deducting any money and then make that deduction within two months of telling them.
  • a Court directs that a deduction be made
  • a bargaining fee arrangement applies to the employee
  • an employee is required by law (for example, income tax, child support payments or other statutory purposes) to make payments.

If an employee is provided with board and lodging the employer may deduct the costs of board or lodging where the amount is fixed under any Act, determination or agreement. If the amount payable is not fixed, the employer may deduct no more than 15% for board, or no more than 5% for lodging.

If there is a breach of the Act or an employment agreement, call the Department of Labour on 0800 20 90 20.

Do you have a KiwiSaver question? Send us an email and we'll do our best to get you an answer,

 

 

I'm very sorry to hear about your job loss. Hopefully it's only a temporary situation?

With respect to your KiwiSaver account, you don't need to fret too much.

With your employment terminated, you contributions will automatically cease. When you get a new job, you can pick up where you left off. If, for some reason, you become ineligible for the KiwiSaver scheme you were with (i.e. it was an employee-only scheme) you can use this as an opportunity to pick your own provider. (For a menu of providers see our schemes section here).

If you're fortunate enough to get a redundancy pay-out with that kiss-off, you're job prospects look good and you have sufficient emergency funds to survive on (six months income is now the recommended minimum), you may want to continue adding to the pot as you are entitled to make voluntary contributions.

Under the KiwiSaver regulations, you're free at any time to make lump sum contributions. Bear in mind however that this money is thereafter irretrievable. Well, that's not exactly true. If you're situation is really bleak, you can go the route of a hardship application. If approved, you can raid your entire KiwiSaver earnings and contributions, minus the kick-start and tax credits.

If you are a Christchurch resident, this process should be easier than it might normally be. On compassionate grounds, Government recently announced some changes to simplify the process for the earthquake victims. (Click here to read Commerce Minister Simon Power's statement on the subject). Unless you've been contributing for less than three months, you'll have to exercise this option through your provider.

The other option in the event of a potential pay-out, is just hanging on to the money. Lock it away somewhere safe until you get another job.

Thinking optimistically for a minute, if you get back on your feet quickly, you don't have any debt,  you're not going to starve and you hit the ground running with two great part-time jobs, you can ride the KiwiSaver wave in full force. According to the rules, you can pile in contributions from two jobs and thus receive the benefit of contributions from two employers. You're member tax credits will max out at NZ$1,043 and you won't get a second kick-start so you may be no further ahead than if you had a single job but your savings discipline would be strong.

KiwiSaver foes might regard your situation as a prime opportunity to exit the national savings programme (via a KiwiSaver holiday) or else the hardship option and take the Do-it-Yourself approach to retirement savings. This won't likely apply to your situation but for the benefit of others reading this, to be eligible for a KiwiSaver holiday (which is three months to five years at a stretch) you have to have been in it 12 months. 

Also, if you have second thoughts about joining KiwiSaver during the early days of joining, you can still get out of it with minimal hassle in the first eight weeks.

Another consideration to bear in mind if you do get a redundancy pay-out, is that you're eligible for a lighter tax treatment.

A redundancy tax credit is paid at a flat rate of six cents per dollar, for the first NZ$60,000 of the redundancy payment received per redundancy. This is based on the redundancy payment before it has been taxed. The maximum amount claimable per redundancy is NZ$3,600. (For further details see IRD's redundancy tax credit bulletin).

This goes beyond your simple question above but at least gives you some options to mull over.

Good luck with the job search.

If you have a question about KiwiSaver, send us an email.

Are there any KiwiSaver funds or fund managers that invest on ethical principles?

Thanks for your question. I will preface my answer by reiterating that I am not in a position to give you financial advice per se. I can only give you some general guidance based on my own experience and also in my capacity as a financial journalist.

Like you, I am also interested in investments of this nature so can share with you what I've learned.

Ethical investing - known in the industry as socially responsible investing (SRI) or environmental, social and corporate governance (ESG) - has exploded in popularity over the last decade particularly since the financial crisis.

People want to make money but they want to make clean money that isn't linked to unscrupulous business practices that despoil the planet or exploit people. As a result, SRI funds worldwide have grown exponentially. (SRI funds under management worldwide are estimated by the United Nations at US$22 trillion).

While this is encouraging on one hand, the definition for what is sustainable or socially responsible is, at best, loose. There is no universal standard. So a company that might be regarded as bad in your books, could be regarded as good in someone else's.

I'll give you an example. I enrolled my two children in the ASB Global Sustainability Fund (this was started by failed U.S. president Al Gore, you remember the guy who won international fame on the back of his documentary an "Inconvenient Truth). My thinking was that I could give the kids an early financial advantage through KiwiSaver but also an education by teaching them (when they are old enough to understand) about how money is made.

It wasn't until much later that I drilled down to find how just what companies this fund invests in. Apparently, the majority of people who take up this fund come through an advisor or else are presumed to be smart enough to have done their own research. I took a leap in faith (never do this with investing) and naively assumed that someone who was trying to save the planet would not invest in anything that was less than 100% clean and green.

I was therefore shocked to find in my holdings a pharmaceutical company, a petrol company and a financial advisory firm for 'high net worth individuals,' not exactly what I'd imagined as green award winners. Okay, so the pharmaceutical company is trying to find a cure for diabetes, the petrol company doesn't have any offshore disasters (as far as I'm aware) and the rich folk who I'm helping to make richer through better advice, are apparently ethical investors themselves but still. You get my drift.  (To read more see Amanda Morrall article's on "How to be Good in KiwiSaver''.

Due to the highly subjective nature of ethical investing, it would be impossible to create a fund that met every investor's expectations of what a socially responsible portfolio should look like. That doesn't mean it isn't possible to find one, it's just a caution about not accepting a SRI at face value.

Before you go shopping you need to first ask yourself what you think constitutes a socially responsible investment (and what kind of companies that would include). When you have those ideas clear in your head, then check out what's on the market and look for a fund that marries your personal values with your financial objectives.

In a previous article on the subject, I noted the various SRI's on offer in KiwiSaver. I'll note them again below. They link back to our website detailing their objectives.

See Interest.co.nz's profile of the Forsyth Barr Socially Responsible Investment Fund

See Interest.co.nz's profile of Grosvenor KiwiSaver Socially Responsible Investment Fund

See Interest.co.nz's profile of the FirstChoice KiwiSaver Global Sustainability Fund

See Interest.co.nz's profile of the Fidelity KiwiSaver Ethical Kiwi Fund

See Interest.co.nz's profile of the Craigs kiwiSTART Defined Balanced SRI Fund

See Interest.co.nz's profile of the SuperLife Ethica Pool

You also asked about fund managers.

As quite a few KiwiSaver funds are managed offshore, you'll have to probe further to check up on their background. One resource you might find useful is the Responsible Investment Association of Australasia Responsible Investment Association Australasia (RIAA).

Fund managers that have undergone formal training in this space to become certified are listed on this website. As part of their membership requirement, they're required to submit a complete list of all the companies that make up their ethical fund portfolios. Believe it or not, this is not routinely done. The argument, by fund managers, is that by publishing a complete list of their holdings, it would put their ideas and strategies at risk of being poached.

It all sounds like hard work but if you know how to google and don't mind making a few phone calls, it's all information that can be readily obtained. The thing is not being scared to ask questions of your provider, ask 10 if you need to, not being satisfied with half-baked answers, and sticking to your principles.

I hope that's useful.

Do you have a question about KiwiSaver? Send us an email and will try to get you an answer.

 

Amanda

Congratulations on the birth of your first child. Exciting times.

Despite the mockery of colleagues, you are wise to start thinking of your daughter’s long-term financial security. Folks have different opinions about how much financial support they ought to give their offspring but with the exponential cost of living these days, you could be sparing your daughter a life-time of debt later on.  And yes, even $2 a day will go a long way.

New security laws in New Zealand prohibit us from giving you specialised advice on KiwiSaver strategies and specific funds and allocations. You'll need to do your homework I'm afraid or else seek some professional guidance from a financial advisor. As a starter, you can check out our KiwiSaver section and explore the different funds on the market to get a flavour for what's in them and what they return.

But I can reassure you that the earlier you start saving, the better you, or in this case your daughter, will fare in the long-term. Compounding interest is indeed a thing of beauty when it works in your favour. For that reason, and I'm speaking in general terms here, many fund managers maintain a KiwiSaver fund that has a high exposure to equities will stand you well if you have time on your side. That's owing to the fact that equities have, historically, produced better returns over long periods of time. Fund selection is a discussion best had with your provider, a financial adviser or someone whose financial opinion you trust.

Money wise, to give you an idea of how much she could bank I used the regular savings calculator on the Retirement Commission's Sorted website. I put in $1,000 (which is what she’ll get with the kick-start) and assumed a real rate of return (after fees and taxes) of 3.0%. From now until your daughter turns 18, those regular NZ$2 a day contributions  will grow to NZ$15,740.53. Plus, she’ll earn another NZ$5,237 in earnings on that.

So your toothless grinning bundle of joy could reasonably expect to have $20,978.38 (in nominal dollars) in the bank when she turns 18. It's not an insignificant sum of money that could be used as a first-time home deposit particularly if there was a partner (obviously not something you want to contemplate for awhile yet) on the scene to match that.)

When she joins the workforce and starts making more sizable KiwiSaver contributions of her own, with the added benefit of employer contributions plus NZ$1,043 in tax credits, her KiwiSaver pot will really take off.

On sleepless nights you can play with the Sorted's KiwiSaver calculator, conjure up some hypothetical salary scenarios for your future Nobel Prize laureate and see how she’ll fare in retirement. That in itself might help get you through the tough parenting years ahead.

If you are a regular to this site, you’ll know the scheme is not without its flaws or critics for that matter. The classic arguments against KiwiSaver are: a) that it’s future and those juicy benefits are not assured and that b) fees and expenses charged by the provider will rob your returns over a long period of time. (To see how much fees reduce your savings by see our cost benefit calculator).

In the absence of a better alternative, or a huge inheritance, KiwiSaver is not a bad way to give your bub a leg up on her retirement savings.

At least you’ll have some peace of mind knowing that you did your bit in her younger years to give her a good head start in the savings department. When she turns 18 she can decide for herself whether the scheme is worthwhile pursuing.

Also, when your colleagues start moaning in 15 years time about how they’ll be living with their children forever because it’s too expensive for them to ever move out, you’ll have the last laugh.

Thanks for writing and happy savings.

Unfortunately you cannot self manage KiwiSaver.  You have to invest in an approved scheme. There is a scheme called Smartshares which invests in a couple of ETF's (smartFONZ and smartMOZY).  Depending on your investment balance the fee is either 0.85% or 0.65%.  You can find the investment statement here.  Otherwise Craigs Investment Partners offers a personalised scheme but that will sting you 1.25% in brokerage and 1.25% in custodian fees.

 

 

Thanks for your question.
 
As it stands, if you decide to quit NZ, you are able to take your KiwiSaver funds with you and close out your account. There is however, a minimum mandatory one-year waiting period to do so.
 
On Government's KiwiSaver website, it states hat you may be able to withdraw your contributions, your employer's contribution, the $1,000 kick-start and all the returns your fund has generated. The tax credit portion of your KiwiSaver fund is the only part that is exempt. Those monies are returned to Government.
If you are going this route, you'll need some paperwork to back up your request. 
 
That includes a statutory declaration that says you have permanently emigrated from New Zealand. You'll also need to provide evidence that you have left the country; passport records, boarding passes and the like. You're also required to show proof that you have lived at a overseas address during the year that you left the country.
 
The transferability question is murkier.
 
With New Zealand and Australia moving toward a Single Economic Market, there are provisions to allow an ease of movement of superannuation funds. That is expected to apply to KiwiSaver. Your provider should be able to advise when that will be possible and how to go about it.
 
So far, Australia is the only country with whom a smooth retirement savings transference can take place. Yet the same outcome can effectively be achieved regardless of where you move, points out Nigel Tate president of the Institute of Financial Advisers.
 
Unless you spend your KiwiSaver nest egg upon receiving a cheque (a distinct risk for some I imagine) you should be able to deposit the money in a comparable retirement savings vehicle wherever you end up.
 
There should not be any penalties or fees for closing out your account if you are emigrating. But just to be safe, it's best to check with your provider and perhaps get something in writing if there is any doubt of that policy changing down the road.
 
For those who plan to remain invested in New Zealand and KiwiSaver, transferring between funds and amonst providers could get a little stickier, or at least more expensive. While the service was previously free of charge to KiwiSavers, providers are now starting to limit the number of complimentary fund transfers you can take. According to Tate, providers are also looking at imposing a charge to change to another provider.
 
As KiwiSaver nesteggs have grown in value, transfers have started to happen with greater frequency. While there may be some benefit in doing so,  the chopping and changing routine can be costly in the sense that high return-chasing KiwiSavers are buying into a new fund when unit prices are high.
 
Whether you are staying or leaving, transfering or staying put, it pays to look at the big picture, read the fineprint and look closely before you leap.
 
Do you have a question about KiwiSaver?
 
Send us an email and we'll do our best to find you an answer.
 

Thanks for your question. Everyone likes to think they're right but the fact you are questioning your asset allocation reaffirms that old adage that with age comes wisdom. Getting that balance right now could spare you some grief later on down the road. I took your question to a couple of investment consultants so you could get the benefit of an expert opinion on this issue. The answer may not be as specific as you would have liked but you'll understand that once you read their submissions.

This first reply comes directly from Ryan Cutts with Forsyth Barr's Christchurch office.

One thing you should consider when looking at any individual investment or a component of your investments, say KiwiSaver, is to look at your overall portfolio composition. You should never consider an investment in isolation, but in terms of the big picture.  

Breaking things down at present you have $40,000 worth of Australasian equities, $40,000 of international equities and $40,000 worth of listed property trusts. As a result you have $120,000 invested in growth assets.

Do you consider your freehold property as an investment? If so, what is its current valuation? You also mentioned that you have “other investments”, what types of investments are they? Cash? Term deposits? Listed bonds? Gold? Artwork? And what is the value of these?
 
Based on your age and assuming you have no debt, you should be looking at an asset allocation which is balanced between income and growth assets. Meaning approximately 50% of your assets in cash, term deposits or listed bonds and the other 50% in shares, both domestic and international, and listed property trusts.

This type of investment strategy could be defined as having moderate risk and you accept that you may lose value for variable time periods, in the interest of seeking a “real” (inflation adjusted value) increase in the value of your entire portfolio.  

Your KiwiSaver mix (in isolation) would be considered to be moderate to high risk in that two thirds are in volatile growth assets.  Whilst not necessarily inappropriate you are at an age where losses are harder to recover than for those in younger age brackets.

The make-up and value of your other investments will therefore define whether you have your mix right or you should be more conservative or aggressive.

(Ryan Cutts is an NZX Advisor for Forsyth Barr in Christchurch. For investment advice contact him on 03 363 1413 or ryan.cutts@forbar.co.nz or by email: ryan.cutts@forbar.co.nz)

A second opinion

This one comes from David Wallace, Manager of AMP Corporate Superannuation

Answer #2: First of all, congratulations on embracing KiwiSaver for your retirement savings. There are several things you need to take into account when considering whether you have the right mix of investments for your current situation (and financial goals).

The first is to determine the type of investor you are, which can be done by completing a risk profile questionnaire. These are available on most financial websites (e.g. amp.co.nz) including that of the Retirement Commissioner - sorted.org.nz. This helps investors to determine things like: their investment time frame,  the level of volatility they are comfortable with, their willingness to take financial risks and their investment experience.

Knowing your risk profile or your tolerance for risk is an important factor to consider before investing. Once you have decided on the timeframe you would like to invest for, you need to find the balance between risk and potential returns that is right for you.

For example, our minimum recommended time frame for an aggressive investor is at least 7 years.

You seem to be heavily invested in growth assets - property and shares - not only in your KiwiSaver fund choice, but also with your freehold property investment.  

Although growth assets have the potential to provide greater returns over the long run, they can be very volatile. You do not mention what your other investments are. We hope that you do hold some income assets - bonds and fixed interest. These will help to diversify your overall portfolio - an important aspect of investing.

You have provided the asset allocation for your KiwiSaver, but as you haven't provided detailed information about your other investments, it is difficult to know your overall position and whether your current investment mix is suitable.

We recommend that you meet with a qualified investment adviser, who can review your total situation and provide appropriate recommendations

David Wallace is Manager of AMP Corporate Superannuation. He can be reached at 09 337 7644 or by email at david_wallace@amp.co.nz

A: Good question. And I doubt you're not the only one stumped on the financial flow of KiwiSaver money. Inland Revenue explains this process on its website under the KiwiSaver section. Here's the link. You should take a moment to read it fully yourself but in nutshell, this is what happens:

When you first join KiwiSaver there is a three month delay before Inland Revenue passes your and their contributions over to your provider. Your NZ$1,000 kick-start will follow with your first contributions. Ongoing contributions also take about three months to reach your KiwiSaver account too. Sometime it can take longer if Inland Revenue needs to confirm something with your employer. Or delays can also be caused by your employer filing late or making a mistake, or if they didn't pay the correct amount.

If your patience is exhausted, you've checked with all the appropriate parties and you're still struggling for an answer, you might have to step it up a notch. There is no KiwiSaver ombudsman as such however theGovernment Actuary effectively serves that role. Interestingly enough, the Government Actuary's job will be phased out when the Financial Markets Authority is established in May. Presumably, a complaints process with be established through the new authority.

Another good way to tell what's going on with your KiwiSaver is to register on-line with Inland Revenue and then review the comings and goings in your KiwiSaver through the  "My KiwiSaver" page.

Here you'll be able to see your KiwiSaver balance as well as all the transactions that take place with it. You can also update personal information and appy for a contribution holiday on-line (not that I'm encouraging that.) On the IRD website itself, you can also see detailed earning information and how much you pay in taxes. This is all useful stuff to know, if you aren't already an active user.

Inland Revenue suggests you check up on your KiwiSaver account regularly. They suggest every six months as that would allow for any time delays you might experience while waiting for the release of money to your provider. You can also check up on your KiwiSaver account through your provider's on-line facilities but the extent of the information varies widly among the providers. Those inconsistencies are something the Ministry of Economic Development is expected to iron out, under the big umbrella of financial reporting requirements currently under review.

The biggest hassle in all this is remembering yet another password. My suggestion is to add these useful websites to your favourites on your computer and try to make a habit of checking in on them on regular basis. As your KiwiSaver account grows in size, so you will level of interest.