I put money in to KiwiSaver every time I get paid. When can I actually use it?

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There are 4 situations in which you can withdraw your KiwiSaver money.

1. When you turn 65 years old.

This one is pretty self explanatory. This is so you can live off this big lump-sum payment after you retire.

If you continue to work after 65, that’s great. And you can actually keep contributing to KiwiSaver. The difference is that you’ll be able to withdraw the money whenever you like, while still reaping the benefits of your employer matching your KiwiSaver contributions up to 3% - This is on the condition they’re nice enough to continue contributing, as it’s not mandatory for your employer once you’re 65. If you’re self-employed, you can continue to make voluntary contributions into your KiwiSaver.

2. When you buy your first home

You can apply to withdraw your KiwiSaver money when you go to buy your first home. As long as you’ve been in KiwiSaver for 3 years or longer and have never owned a property before*, then you qualify to receive your KiwiSaver. The main reason for the "application" is so they can make sure you’re actually using the money to buy your first home.  

A few things to note:

• You have to leave $1,000 in your KiwiSaver account

• You don’t actually get the cash in your bank account, the money goes to your lawyer and they pay it directly to the vendor (seller)

• You don’t have to withdraw all of it

• You need to intend on living in the home, i.e. it can’t be an investment property

*If you’ve already owned a home in the past (but have not withdrawn your KiwiSaver before), you may still be able to withdraw your KiwiSaver money. In this situation you need to contact housing New Zealand and have them determine that you are in the same financial position as a first home buyer (basically they just look at the combined value of your assets). They’ll then give you a certificate to pass on to your KiwiSaver provider - and again it will be up to the provider to make the call on releasing the funds.

3. If you’re experiencing significant financial hardship.

You can actually withdraw your KiwiSaver funds early if you’re seriously strapped for cash.

For example:

• You can’t make your mortgage repayments on time, and the bank is threatening to take the house.

• You can’t afford to live - This isn’t just having to miss out on a few nice dinners. It means you can’t afford pay for the basic necessities of life.

• You need to pay for medical treatment for yourself or a dependent family member, due to sickness, injury, or terminal illness.

How to avoid getting in to money trouble.

A major contributor to financial hardships is the above situation: someone gets sick. This is made even worse if they are one of (or even the only) income earner in a household.

Sometimes people assume ACC will help them out. But remember, this only covers accidental injury, not any kind of sickness or treatment for illness. Learn more about what ACC covers here: https://www.acc.co.nz/im-injured/injuries-we-cover/

Fortunately it’s possible to protect ourselves against these risks. A small amount of insurance, for things such as medical bills and covering lost income, can make a huge difference. This means if something happens, you and your family won’t have to dig into savings, apply for KiwiSaver funds or even remortgage the house just to pay for medical bills and the basic costs of living.

4. If you’re seriously sick or injured

And you don’t have insurance.

You may be able to withdraw your KiwiSaver money if you have a serious illness, injury or disability which means you either can’t work anymore, or may die as a result.

Remember, you’re using your nest egg on this - So once the money has been spent on medical bills etc. - you’ll be back to square one in terms of saving for your retirement.

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Do you know what’s happening with your KiwiSaver? For example, who your provider is, and what type of fund you’re in?

To make sure your nest-egg is in the right hands, and in-line with your financial goals, you can have a free chat to one of our advisers. Just click below.

Freelancers – here’s how to make sure you’re still contributing to KiwiSaver.

If you are not an employee of a company, you will need to make ‘voluntary contributions’ to your KiwiSaver account.

Firstly, let’s cover off the why. Here at Ducks in a Row, we think damn near everyone should be in KiwiSaver, contributing at least 3% of their income. But if we can’t convince you to do that, you should at least consider contributing a total sum of $1,042 per year.

Why? Because if you do, the Government will give you $521 each year. No strings attached.

For every $1 you put in to your KiwiSaver account, the government will contribute 50 cents, up to a total of $521, every single year. That is a 50% return on investment on your $1,042 – which is huge. And it will only cost you about $20 per week.

One thing to note: you only qualify for this perk if you are aged between 18-64, and mainly live in New Zealand.

Now, let’s get down to how you go about making contributions.

Oddly enough, this isn’t as straightforward as it should be, so we’ve broken it down for Westpac, ASB, ANZ and BNZ account holders.

There are a couple of ways you can make voluntary contributions. Either set up an automatic payment, or make manual payments.

Some banks don’t let you make automatic payments for KiwiSaver contributions – including Westpac and ASB. So, if you’re with one of those banks, you will need to do it manually each time.

You could do a one-off payment of $1,042, or split this into two or three payments throughout the year. But if your bank lets you, it can be easier to simple set up an automatic payment of approximately $21 a week to receive the maximum member tax credits.

Whichever way you do it, make sure you’ve contributed at least $1,042 before June 30th every year, as this is the cut-off date. 

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ANZ

Go onto your online banking

1. Set up a payment (manual or automatic)

2. Go to your payees list – Search for the name of your KiwiSaver provider. (Image 1 below)

3. Select the amount you want to contribute (eg $20), when the first payment is to be deducted and the frequency of payments ongoing. (Image 2)

4. It will ask you to add the reference details so your KiwiSaver provider can identify you. If you’re not sure what they are, they will be on your KiwiSaver statement or online profile. (Image 3)

5. Select confirm and you’re all done!

Image 1

Image 2

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ASB

Go onto your online banking

1. Click the payment tab and select ‘IRD Payments’ from the drop-down menu.

2. Select ‘KiwiSaver member account (KSS)’ from the drop-down menu. (image 1)

3. Put in your IRD number, the amount you want to contribute (eg $20). (image 2)

4. Select next, confirm and you’re all done!

Image 1

Image 2

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Westpac

Go onto your online banking

1. Select ‘Pay and transfer’ on the right hand bar

2. Select the account you want the money to come out from.

3. Select ‘IRD (inland revenue) pay tax’ from the drop-down menu.

4. Under the details section, select ‘KiwiSaver Member Account’ from the drop-down menu.

5. Put in the amount you want to contribute (eg $20).

6. Select confirm and you’re all done!

Image 1

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BNZ

Go onto your online banking

1. Select ‘pay or transfer’ from the drop-down menu

2. Select the account you want to contribute from (eg savings). (image 1)

3. Select ‘Employer - KiwiSaver deductions for employees - KSS’ from the drop-down menu.

4. Put in the amount you want to contribute (eg $20) and your IRD number.

5. Select continue and you’re all done!

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If you would like to get your ducks in a row, just click the button below and we will sort the rest.

Should I bring my Aussie Superannuation money back to New Zealand?

There are over 650,000 Kiwis living in Aussie. Every year, thousands return back to Aotearoa. No surprises there. But while working over the ditch, they’re generally obliged to sign up to the Australian superannuation scheme - and it’s a sizable 9.5% that their employer pays on-top of their wages.

But what happens when they move home? Should they bring their Aussie-super back to NZ’s KiwiSaver scheme?

Unfortunately like most things, there’s no one-size fits all answer. It depends on your personal circumstances, and we’ve had a go at breaking down the key factors below.

Here are a few things to know about before making the move:

 

Pros

• It can be done: Kiwis can transfer their super into KiwiSaver (and vice-versa) if you’re planning on moving to that country permanently.

• Tax: Transferring the money across the ditch is a tax-free transaction.

• Save on Fees: If you have both KiwiSaver and a superannuation fund, you are probably paying two sets of fees. So, it makes sense to have your money in one place, and get charged just once.

• Retirement rules: Instead of waiting until you’re 65 (the registered retirement age in NZ), you can access your KiwiSaver at 60, in line with the Australian rules.

• NZ withdrawal rules: compassionate ground rules apply in New Zealand, so you can apply to withdraw your funds early if you suffer a serious illness or financial hardship.

Cons

• First Home Withdrawals: You can’t withdraw your Australian money for your first home, even after it has been transferred into KiwiSaver. The money is locked up until retirement, because Australian rules apply.

• Insurance Benefits: Australian super often comes with added benefits, for example life insurance. You could lose these entitlements by moving the funds out of Australia. It’s so important you read the fine print, or talk to an expert.

• Exit and Entry Fees: You may be charged for the transfer into your KiwiSaver fund (or exit-fees for leaving) – If you have a few different super funds, you may be charged the fee several times.

• Exchange Rate: It can take some time to transfer the money, and the exchange rate will fluctuate over time. The applicable rate when the funds are transferred may positively or negatively impact your nest egg.

• Tax burdens – Tax on Aussie super is only 15%, whereas in New Zealand it is up to 28% depending on your income. Only Kiwis who pay less than 15% PIR on their KiwiSaver (i.e. earn $14,000 or less, will pay less tax in NZ than Aussie.

Get specialised advice about switching your nest-egg

Moving your nest-egg overseas can be quite a daunting decision. It’s a good idea to weigh up the pros and cons of moving the money, or leaving it where it is for now. Your decision will primarily relate to your individual circumstances, i.e. your age, your financial needs at the time, how much you earn, and whether you intend on retiring here in New Zealand.

It’s a great idea to get independent financial advice before moving the money. Seeking help from people who do this sort of thing every day, can make the process a whole lot easier.

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We hope you’re enjoying Ducks in a Row. If you’re interested in learning more about money and all the rest (basically the things they didn’t teach us at school) subscribe to our blog, updated every couple of weeks.

Or,

If you would like to speak to an independent financial adviser about getting your Ducks in a Row, click the button below, and we’ll sort the rest.

Copyright 2019 Row of Ducks Limited

How much should I be contributing to KiwiSaver?

Day 1. Darryl from HR shoves a KiwiSaver form in front of you. He wants to know how much you're going to contribute and needs the form back in 26 minutes. What do you do? Go.

Step 1 - Figure out why you're actually putting money into KiwiSaver.

We have already written about when you can withdraw your KiwiSaver funds here. Read that, because it only takes 5 minutes. If you can't be bothered, just know it basically comes down to whether you want to withdraw your KiwiSaver money in the short term, like buying your first home, or in the long term, like when you retire. This should factor into your decision.

Step 2 - Ask Darryl how much the company will pay towards your KiwiSaver.

They're legally obliged to pay 3%. If that's the case, then skip to step 3.

If it's 4% or even 8% (you lucky bugger) then you have to put some thought into this one. Think about it, if your employer is willing to match your KiwiSaver contributions up to 8% that's pretty great. Based on a $60k salary, changing your KiwiSaver contributions from 3% to 8% means you'll be paid an extra $2,100 per year in contributions from your employer. That's the equivalent of getting a $3,200 salary bump, for doing literally nothing other than increasing your own contributions.

Combined, you and your employer will go from putting $3,060 into your KiwiSaver account each year at 3%, to a whopping $8,160 at the 8% rate.

Step 3 - Look at your budget, and determine what you can afford

If you haven't got a budget yet, do it. There's a really good one on sorted.org that you can find here.
If things are really tight week to week, contributing more than 3% into KiwiSaver might not be a good call. But if you find you're spending your extra cash on unnecessary lay buy purchases online, and smashed stone-fruit on toast with a sprinkle of feta, you might want to consider upping that contribution instead.

Step 4 - Tell Darryl to back off

In all seriousness, he can't force you to make this decision in 26 minutes. Tell Darryl you need a day or two to think it through, and you'll get back to him as soon as possible.
This is when you might want to talk to a financial adviser. Their help is free, and they're really experienced at this sort of thing. Pick up the phone and have a quick yarn with your person before making the call. We have a select few really trusted advisers that can help you at any time, just get in touch.

An example of a handy thing they'll say: you can change your contribution rate whenever you like. So if you do choose a higher contribution rate and find that you're struggling financially, it's not a big deal to drop back down to the 3% mark.

So there it is. A step by step guide to making a call on your KiwiSaver contributions. If you have any more questions (like which fund to choose) check out our other posts or chat to one of our trusted financial advisers. 

Bank or specialist KiwiSaver provider - which is safer?

There are roughly 25 KiwiSaver providers available to the public. 5 are banks, and the rest are what we call specialist providers.

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Banks: Are generalists, they do a lot of stuff. Bank Accounts, Mortgages, Term Deposits, KiwiSaver etc.

Specialists: Focus on KiwiSaver.

The main differences between the two:

1. The specialist providers only handle KiwiSaver investments, so they have more time to focus on getting the best returns. They have to perform well, because it’s all they do.

2. The majority of the banks offering KiwiSaver are Australian owned, with Kiwi Bank the only NZ-owned bank provider.

Most people want the higher returns that specialist providers can offer, but they wonder whether their money is safer if invested with one of the bank-run KiwiSaver schemes.

This question is totally understandable. However, once you look under the hood, it’s clear that our KiwiSaver money is just as safe with a specialist KiwiSaver provider.

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Here’s Why:

1. Regardless of who your KiwiSaver provider is, they can’t access your money directly in any way. No cheeky withdrawals, nothing.

2. Every major decision your KiwiSaver provider makes (such what fees to charge, investment decisions etc.) all have to be approved by what’s called a “Supervising Trust.” These trusts are all regulated by New Zealand’s Financial Markets Authority - Meaning your money is in good hands.

3. There are only 3 of these Supervising Trusts being used by the majority of providers. And the banks are using the same ones as the specialist KiwiSaver providers. Check the table below:

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KiwiSaver Trusts – Who uses who?

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When it comes to KiwiSaver; your level of risk depends on the type of fund your money is invested in (e.g. conservative, balanced, growth) - and not who your provider is.

If you’d like to know more about what these specialist providers can offer, the best step is to chat to one of our financial advisers. They work with a number of the best specialist providers, and can help you select a provider, and fund, that’s right for your unique situation. The best part is, their help is free of charge.

The easiest $521 you’ll ever earn. Free money from the NZ government.

If you don’t feel like you’re totally clued up on KiwiSaver- don’t fret, many of us aren’t. Read about the basics here.  

The government is willing to put $521 of cold hard cash into each of our KiwiSaver accounts, every single year. Unfortunately, thousands of Kiwis leave this money unclaimed.

It’s called a ‘Member Tax Credit’ – which is a weird name considering it has nothing to do with tax, it’s literally free cash in to your KiwiSaver account, once a year.

There’s no catch. This is just the government’s way of encouraging New Zealander’s to put money into KiwiSaver.

Over $1 Billion has been left unclaimed by Kiwis over the last three years.

A 25 year old, receiving the extra $521 each year would equate to an extra $20,840 by the time they can withdraw their funds at age 65. And this doesn’t even take in to account interest earned on the money over that period.

How to make sure you get your cash
For every $1 you put in to your KiwiSaver account, the government will contribute 50 cents, up to $521, every single year.

That means you only need to invest $1,043 into your KiwiSaver account each year to make the most of this government bonus.

To give you an idea, at a 3% KiwiSaver contribution rate, your yearly contribution  will be:

• $900 – on a $30,000 salary

• $1,200 – on a $40,000 salary

• $1,500 – on a $50,000 salary

A person on a $30,000 salary is missing out on a portion of their free money and to get the full $521 will need to contribute an extra $142.

If you’re earning $34,762 or more on salary - and you’re contributing the minimum 3% to KiwiSaver - then you’re automatically getting the full $521 free from the government each year. (If this is you, the next step is to make sure you’re not in a default KiwiSaver fund).

If you’re earning less than $34,762 per year, you can top up your KiwiSaver account manually, to make sure you contribute a total of $1,042 each year, and ensure you receive the $521 bonus payment from the government.

If you’re a stay-at-home parent, self-employed or on a contributions holiday,  you need to make sure you put in $1,042 each year so you still get $521 (this is about $20 per week). If this is a bit of a stretch, don’t worry, you’ll still get 50 cents on any other contributions you put in. eg $500 will get you $271 free money.

If this is all a bit confusing, and you don’t really really understand what’s happening with your KiwiSaver, talking to a financial adviser is the easiest way to get this sorted (remember, their help is free). Making your KiwiSaver work effectively is a simple process. You just need to have a quick chat with someone who knows what they’re talking about.

Never picked a KiwiSaver provider?

That means you’re probably in a default fund, and may want to change. 

Like most of us, if you didn’t specifically choose a provider for yourself when you first signed up for KiwiSaver, Inland Revenue allocates you to one of nine default KiwiSaver providers.

This is to get you started, until you decide how you want to invest your contributions. The problem is, most of us haven’t touched it since, because we didn’t know we were supposed to.

By the way

Provider = the company that looks after your money. Each provider has a number of funds (usually 3-5).

Fund = Where the provider pools all their client’s KiwiSaver money, and invests it in various different places (eg shares, property, term deposits, bonds).

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A default fund is also known as a conservative fund. This means your money is invested conservatively (i.e. low risk = potentially lower reward). Over 90% of Kiwis are in this boat.

It’s not necessarily the best idea to be in a default fund.

Conservative funds and some of the default providers have relatively low rates of return. That means your KiwiSaver money may not be working hard enough for you, compared to your risk profile.

Over a lifetime this could mean missing out on thousands (potentially hundreds of thousands) simply because no one gave us the advice to change it.

The other issue with being placed in to a default fund, is that we are automatically put on the highest Prescribed Investor Rate (PIR) of 28%. This rate determines how much tax we pay on the investment profits out KiwiSaver accounts make.

For many of us, this 28% may be the incorrect tax rate, so we are paying more than we need to. Worst of all, this isn’t one of those “tax refund” situations. Pay too much tax here, and the money is gone. This is what is known as a “final tax.”

 

So, you’ve figured out you may be in a default fund… where to from here?

Which fund type you decide to go into depends entirely on your circumstances:

• A younger person may be more comfortable with risk, as they don’t plan to withdraw their KiwiSaver money until they’re 65 (They’re in it for the long haul).

• At the same time, they may need that money soon for their first home, and therefore might not be willing to risk it in a high growth fund.

There are fund types to suit every New Zealander, and you have the ability to customise them to reflect your attitude towards risk.

If you’re unsure, or just want a bit of help to figure out things such as your prescribed investor rate, we have a team of financial advisers on hand to help you choose the right one. The best part, their help is absolutely free. 

Which KiwiSaver provider should I use? Aren’t they all the same?

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Nope.

They’re definitely not. If you’re contributing to KiwiSaver, it’s best to choose a provider, and then a fund, that’s right for you.

A basic note on what is happening with your money.

The money saved away in your KiwiSaver account will become pretty substantial over time. If it sat in the bank, it wouldn’t earn very much interest at all. Most people want their KiwiSaver provider to be investing their money in things that will earn them a decent amount of interest.

By the way:

Provider = the company that looks after your money. Each provider has a number of funds (usually 3-5).

Fund = Where the provider pools all their client’s KiwiSaver money, and invests it in various different places (eg shares, property, term deposits, bonds).

First, choose your provider.
Each provider has a slightly different offering. Some will be a better fit for you, depending on your preferences.

The questions you should be asking:

• How much am I comfortable paying in regular fees? This is a big one. KiwiSaver fees are big business, and some providers charge much more than others.

• Where am I comfortable with my money being invested? Also important. Some providers invest more ethically and transparently than others, e.g. they refuse to invest in tobacco or mining companies.

• What level of service do I expect? Do I want regular reviews, and updates about how my KiwiSaver is performing?

Then, choose your fund.

While all providers are different, their funds all follow the same general trend. They have:

• A  conservative fund: where your money is invested cautiously e.g. in big, stable companies or Government and Corporate bonds. You have less risk, but potentially less reward.

• A growth fund: where your money is invested more aggressively, potentially in high growth companies. You have more risk, but potentially more reward.

• A balanced fund: Somewhere in the middle. More risky than a conservative fund, but not as much risk as a growth fund.

You are able to split your KiwiSaver money across different funds. For example, someone may wish to have half their money in a balanced fund, and the other half in growth fund - In order to spread some of the risk.

Which fund you decide to go with totally depends on your circumstances.

• A younger person may be more comfortable with risk, as they don’t plan to withdraw their KiwiSaver money until they’re 65 (They’re in it for the long haul).

• At the same time, they may need that money soon for their first home, and therefore might not be willing to risk it in a high growth fund.

There are other factors to think about, like making sure your provider has your correct tax rate recorded. What does this mean? When your provider invests your KiwiSaver money, you will get returns on these investments. As with returns on all investments, these gains will be taxed. The amount you’re taxed depends on your yearly income. A common problem is that people are registered with an inaccurate rate. If you’re paying too much tax - i.e if your PIR rate is set to 28% instead of 17.5%, then we have a real problem. It’s not like other tax forms, this is final tax which means it’s non-refundable.

If you’re unsure, or just want a bit of help, we have a team of financial advisers on hand to help you choose the right one. The best part, their help is absolutely free.