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. href="https://www.interest.co.nz/kiwisaver/schemes">(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.
2 Comments
If every penny of the redundancy payout is sorely needed and KiwiSaver membership has been over a year, it might be worth considering taking a KiwiSaver contributions holiday before the payout is made. That's because the redundancy payment is PAYE taxable, which then involves at least a 2% deduction for KiwiSaver. I say "at least" because some employers will lump in their 2% into someone's "total" remuneration. In those circs, an effective 4% deduction is made.
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