The New Zealand KiwiSaver scheme is a Government funded initiative looking to help Kiwis maintain a steady savings routine. KiwiSaver focuses on setting individuals up for their retirement (the next phase in one’s life) by contributing money from their weekly earnings, receiving contributions from their employer and the government as well as earning through investment returns. Multiple providers offer to manage New Zealanders KiwiSaver investments, each providing different investment options depending on personal lifestyle needs and their investment time frame.
Currently, KiwiSaver offers personal contribution rates of 3%, 4% or 8% from pre-tax earnings. However, as from 1st April 2019, KiwiSaver has additional contribution rate options of 6% and 10% available for those invested in the scheme. The Acting Retirement Commissioner Peter Cordtz stated the reasoning for the change is that “many New Zealanders tell us the gap between 4% and 8% is too large for those able to contribute more, so they feel stuck on the lower rates”. Inland revenue figures show that 24% of members are contributing at the 4% rate, while only 9% of scheme members are contributing at 8%. The addition of the 6% contribution rates is the perfect middle ground for those stuck between the higher and lower rates, while the 10% rate offers a higher investment opportunity for those looking to maximise their savings as much as possible.
To change your contribution rate, simply ask your employer and they will be able to action the change on your behalf (complete the KS2 form available from the IRD).
If you are unsure whether you should make the change to a different contribution rate, then getting a second opinion from an adviser could be the right step in ensuring you are maintaining a steady contribution rate for both your future needs, as well as leaving enough for your current lifestyle needs.
In addition to the change of contribution rates, the current ‘Contribution holiday’ will be renamed ‘savings suspension’ and the maximum time allowed by KiwiSaver has been reduced from a 5-year suspension to a one-year renewable period. KiwiSaver found that halting contributions for a full five-year period was having a significant impact on members’ long-term savings results. The ‘savings suspension’ will still have the opportunity for a yearly renewal, however, this will now only be after a reassessment of position after the one-year time frame. Existing ‘Contribution holidays’ over the one-year time period will retain their original end date but the option will no longer be offered as from April 1st.
Later, from 1st July 2019, KiwiSaver will introduce another change allowing those over the age of 65, who have previously missed out on the option to opt into KiwiSaver, or who closed their accounts and wish to opt back in, the opportunity to reinvest.
This change also brings in the removal of the five-year lock-in period. This means that those who join KiwiSaver after the age of 60 who have not been a member for the full five years will still be eligible to access their funds once they qualify for the New Zealand Superannuation at 65. These changes come into effect following the decision that the current laws regarding members 60 years and over were “inappropriate” and “there is no apparent reason for those over 65 not to be able to join KiwiSaver”.
For more information on what these KiwiSaver changes may mean for you, or to discuss with an Adviser as to which contribution rate or scheme provider will be the best fitted for you, book an introductory appointment with one of the team at Financial Architects for a full KiwiSaver review.