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To KiwiSaver or Not To KiwiSaver: How Investing Now Can Be Good For Your Future

By The Team | May 28, 2015

New Zealand’s Consumers Price Index for the March 2015 quarter fell 0.3% compared with last quarter, but the prices for fruit, rental housing, and newly built housing all went up. With the basic costs of living and housing all consistently rising, saving money for your retirement becomes less of a focus, and seemingly less achieveable.

But contributing to KiwiSaver, a Government funded superannuation scheme, is easy for the employed, especially when the funds are directed to a savings fund straight from your pay packet before it can even reach your wallet.

With minimum contribution rates set at 3% for employers and the option of 3%, 4% or 8% for employees, and contribution holidays on offer, KiwiSaver is an affordable option for your retirement savings .

What is KiwiSaver?

KiwiSaver is a voluntary work-based savings scheme set up by the New Zealand Government to encourage everyday New Zealanders to save for their retirement. As a worker, you can choose how much you want to contribute: 3%, 4% or 8% of your gross pay (also known as before-tax) wage or salary to your KiwiSaver account.

The best part about KiwiSaver is that designed to be hassle-free which makes it easier to maintain and will ensure you end up with some long-term saving when you’re old and grey. The financial brains behind the scheme built it with you in mind: there’s a massive range of benefits for Kiwis who are keen to save, specifically the $1,000 kick-start contribution from the Government, as well as the regular contributions from your employer and the annual member tax credit paid by the Government.

The catch? Well, KiwiSaver is not guaranteed by the New Zealand Government. This means you make your investment choices at your own risk. Still, it’s less risky than investing your money with private investors.

Who is eligible for KiwiSaver?

Are you a New Zealander? Are you alive? Well then, welcome to KiwiSaver!

You don’t even need to be in employment to be a part of this miraculous scheme you just need the following:

  • Be a New Zealand citizen, or at least a permanent resident
  • Be living in New Zealand
  • Be younger than 65

It’s ridiculously easy! Which leads me to my next question: if you haven’t signed up yet then what exactly are you waiting for?

How do I get started?

How indeed! Again, it’s pretty darn easy; you just need choose one of three simple steps:

  1. Opt in through your employer – fill out a form and your employer will do the rest.
  2. Automatically enrol when you start a new job.
  3. Opt in through a Kiwi Saver provider such as your bank or an insurance company.

Self-employed or unemployed? Even you can join KiwiSaver by contacting a KiwiSaver provider and arranging a regular contribution amount. But do your research, as some providers come with extra fees. You’re here to save money, not spend it, remember!

Living the Dream: Saving for retirement

Getting old is a drag, but just think about how much worse it’ll be if you still have to get your aching bones to work at 6am! While we still currently have the New Zealand Superannuation Fund, there’s no saying if it will still be around when you retire. Signing up for KiwiSaver will give you some relief from stressing about whether or not you can afford to retire. Having a KiwiSaver account won’t affect your eligibility for NZ Super or reduce the amount of NZ Super you would be eligible for – so there’s no reason not to set up an account.

It’s essentially an investment for your future and it will provide you with a better standard of living during your retirement. Just because you’re retired doesn’t mean you want to stop doing the things that you love. Your KiwiSaver fund will ensure that you’re still able to go on shopping sprees or travel the world: whatever your heart desires, you’ve got to plan for it.

Home Sweet Home

When you’re ready to buy your first home, KiwiSaver is there for you to give you a hand. With KiwiSaver you’re able to make a one-off withdrawal of some of your KiwiSaver savings, minus the $1000 kickstart that the Government gave you. To be eligible you just need to have been contributing for at least three years.

If you’re lucky you may even qualify for a KiwiSaver HomeStart grant where the government gives you up to a generous $5,000 towards buying an older home, or up to a massive $10,000 towards buying a new home or land to build on. No, you’re not dreaming! The grants are administered by Housing New Zealand and will be paid to your solicitor so that there’s no sneaky business. Again, to get the grant you just need to tick off the following requirements:

  • You’ve been a KiwiSaver member for at least three years
  • You’re 18 years or older
  • You’re buying or building your first home
  • You have a household income of less than $80,000 per year per person, or less than $120,000 per year for two or more people
  • You have a deposit that is 10% or more of the purchase price, including the addition of the grant
  • You’re planning to live in the house for at least 6 months

KiwiSaver responsibilities for employers

Now you know what you have to do as a member, if you own a business how do you implement KiwiSaver for your staff? The answer once again is EASY. KiwiSaver is designed to be used in your existing payroll process minimising any extra work for you, especially if you’re using a SmartPayroll system!

As an employer you’ve got to answer the following questions:

  • Are your new employees eligible to join KiwiSaver?
  • Should these new employees be automatically enrolled?

Once you’ve determined whether or not your staff are eligible you simply give them the KiwiSaver employee information pack (KS3). Through SmartPayroll, you’ll be able to deduct KiwiSaver contributions and make compulsory employer contributions at the correct rate and forward them on to the IRD by the due date along with your PAYE payments.

You’re not a KiwiSaver cheerleader and we don’t expect you to promote the scheme to your employees, but as a good employer the more encouragement you give your employees to save for retirement the better.

Benefits to saving with KiwiSaver

Here are our Top Ten Reasons for saving your monies with KiwiSaver:

  1. If you’re employed, your employer has to contribute at least 3% of your gross salary into your KiwiSaver account. Whether or not they like you! FYI, that’s on top of your own contribution which means you getting more bang for those bucks!
  2. KiwiSaver makes saving money easy by taking out your contributions before you even see them.
  3. The $1,000 ‘kick-start’ from the Government is a major benefit, and they also hand over an annual ‘member tax credit’ if you’re 18 of up to $521.
  4. KiwiSaver helps you save up for your first home through the KiwiSaver HomeStart Grant and home purchase withdrawal where you can take out the money you’ve saved to put it towards your first home!
  5. Even if you quit your job or lose it, your KiwiSaver account moves with you at no extra cost.
  6. Opting out is easy, but you’ve got to contribute for at least 12 months.
  7. Opting back in is even easier – you just need to do through your employer or through your provider.
  8. It’s your choice: 3%, 4% or 8% and you can change your contribution amount at any time, depending on your situation
  9. Take a contributions holiday if you have other plans for some of that money.
  10. Once you’ve joined, you can make lump sum payments at any time.

And there you have it, all the good reasons in the universe to be a part of KiwiSaver. Have I mentioned how easy it is? It’s even easier with a SmartPayroll system. So get in touch with us today to see how we can help you help yourself by saving for retirement.

http://tvnz.co.nz/seven-sharp/kiwisaver-tips-and-tricks-video-5858652

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