kiwisaver

KiwiSaver: Have the Conversation

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Is your KiwiSaver working as hard as it could for you? Is it time to tweak the dials to maximise your investment or make things more conservative?

 

KiwiSaver is a voluntary savings scheme set up by the government to help New Zealanders save for their retirement. You can choose to contribute 3, 4 or 8 per cent of your gross (before tax) wage or salary to your KiwiSaver account. Your employer must contribute as well—at least 3 per cent of your gross salary.

 

There are a few instances when you can use your KiwiSaver before retirement—these are known as “time horizons”.

 

It could be for:

·      your first home (where you can withdraw all but the $1000 kick start),

·      perhaps you’ll be emigrating (there are some timeframes around when you can take that money out),

·      severe hardship (let’s hope it doesn’t come to that), or

·      when you reach 65 years of age.

 

The key here is to ensure that your KiwiSaver is on track to maximise your return in the time between today and when you’re going to withdraw the money (time horizon).

 

There are several different funds you can invest your KiwiSaver in. These are generally classified as either conservative, balanced and growth or variations of these. You do need to have all of your sum in one classification. You can choose to split a percentage of “units” across a number of different funds (i.e. from a low-risk to a more aggressive fund). For example, you might put half of your savings in balanced and the half in growth. And it’s not a set-and-forget scenario—you can move these percentages around to suit your goals and life circumstances.

 

The investment statements must be provided to you prior to you signing up to KiwiSaver. You can of course do some of your own research. This could be looking at the Sorted website to compare some funds (see who has the best returns, lowest fees, and who invests in socially responsible sectors and so on).

 

The government’s KiwiSaver website provides forms and tools to get things set up, to keep track of your contributions or to help get your money out.

 

There are a number of different levels of advice that you can receive, from “information only” to “class advice” where the representative will outline what is suitable for people in your group or “class”. For example, “we recommend people aged 30 to 45 choose ABC fund” through to personalised advice where the investment structure is tailored to your personal situation.

 

The advice piece is crucial.

 

So many Kiwis are not close to their next time horizon where funds will be withdrawn, and they are sitting in a default fund—where their KiwiSaver is just ticking away and the potential for a larger KiwiSaver balance is not being realised.

 

When’s your next KiwiSaver time horizon? Is it time to have a chat about getting the most from your KiwiSaver?

 

Simon O’Neill is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Is my ex entitled to a portion of my KiwiSaver after separation?

Question:

I have a couple of friends working through the process of separating from their long-term partner. Are they right in thinking they are able to lay a claim to half of a KiwiSaver or retirement fund balance because their partner was contributing to the scheme while we were together?

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The answer is yes.

 

KiwiSaver funds are relationship property, and up for division in a split when they are acquired during your de facto relationship or marriage. This is the case irrespective of whether the funds came from individual, government or employer contributions.

 

However, the portion of your KiwiSaver that was acquired before your de facto relationship or marriage started is protected. This is treated as separate property. This means that only the portion of your KiwiSaver that arises from contributions during the relationship/marriage will be divided equally between you and your spouse as relationship property.

 

For example, if Tom and Mary separate and sell their family home, Tom may take a lesser share of the sale proceeds for the home but keep his KiwiSaver while Mary takes a higher share of the sale proceeds to compensate her for her interest in Tom’s KiwiSaver.

 

If that is not possible, a court order can be sought to direct that the KiwiSaver scheme pay out a portion of the balance to the former spouse.

 

Remember that KiwiSaver comes with unique complications. Accessing the money immediately is not usually possible, as it may be ‘under lockdown’ until someone turns 65.

 

Divorce or separation can be a very costly and emotionally draining exercise if your split is not amicable. Unfortunately, this is mostly out of your control!

 

Adapted from Stuff https://www.stuff.co.nz/business/95163061/ask-susan-what-happens-to-kiwisaver-in-a-breakup

 

 

Debra Halton is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A Disclosure Statement is available free of charge upon request.

What's up with the banks?

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It’s 2018 and change is afoot in the banking world. But, don’t worry, we can also expect much more of the same, says Graham.

Firstly, all banks are now lending at 65 per cent on second-hand investment property. This increase came about on 1 February and certainly helps if you are wanting to build a portfolio. Second, it’s good to note that all banks are also lending up to 85 per cent on new build investment properties. Remember, a second-hand property (by the reserve bank rules) is any property that has had a code of compliance for six months or more.

Apartments .... We have one bank in New Zealand who won't lend at all on off-the-plan apartments and another who will go to 85 per cent. Please notice I didn't say who ... ring us and find out.

Another point of interest in the banking landscape is that, in 2018, we will see a continued exit of banks from giving advice in the investment and insurance space. There is big pressure building in Australia for banks to act in the best interest of their clients which is difficult to do when you only have your own products to wedge clients into. This pressure will continue to flow through to the New Zealand subsidiaries. This will have implications for KiwiSaver as well (for example, ANZ, strangely as New Zealand’s biggest bank, is also our biggest manager of KiwiSaver funds).

This news on investment and insurance advice is good news for Velocity and all other independent financial advisers. Our place with multiple product suppliers is what will continue to be demanded and expected, not just by the market, but also the regulators.

 

Graham Goodisson

 

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A Disclosure Statement is available free of charge upon request.

KiwiSaver and why it's not just for retirement

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Simon O’Neill provides a where-we’ve-come-from and where-we’re-going analysis of KiwiSaver and how it can help you into your first home.


Back in 2007, when KiwiSaver came in, it was touted as a retirement scheme: feed it until you're 65 and you’ll have a fantastic nest egg to assist when retire. You could choose what percentage you contributed, and both your employer and the government would contribute (the latter by way of the member tax credit of up to $521 per year). This is your money and won’t be taken back. The $1000 kick start payment was a tax-free government contribution made to all KiwiSaver members who joined before 2pm on 21 May 2015.

 

Some of us were opted-in by default (1.6 million Kiwis in KiwiSaver in 2011) and have been contributing consistently without much thought or care for what happened to the money. These people will have likely built up something quite substantial that can be considered genuine savings.

 

The money goes into your KiwiSaver account, which is part of a larger fund managed by your KiwiSaver provider and they invest your funds in different assets, like cash, shares, fixed interest and property. You decide the exact match of percentages divided across the different types of funds. The IRD acts like the gate keeper.

 

Our clients (and myself six years ago) were over the moon to hear that KiwiSaver came with another terrific option: I could use a good part of it for the deposit on my first home. Plus, had I been contributing without a break for several years, and met some other pretty surmountable criteria, there was a built-in even more terrific option in the Home Start Grant that could further boost my deposit and general attractiveness to the bank.

 

A KiwiSaver account is a powerful tool to wield when it comes time to ask a home loan provider for hundreds of thousands of dollars. And the bigger your balance is, the closer you can get to that favourable 20 per cent deposit.

 

If you meet the government’s conditions to withdraw all but the thousand-dollar kick start to put towards your first home, you will find yourself in good news and bad news situation. For, yes, you do get a home and a great asset but, also, your retirement fund takes quite a hit. Of course, that home could be just the beginning—but not everyone is a property investor. So, if you’re using the KiwiSaver for your first home, it’s important to get a solid understanding of timing for using your KiwiSaver (and Home Start Grant) for your purchase.

 

Should a boutique KiwiSaver provider shut down (arguably more likely than a bank, but them too) then your money is not gone. IRD will guide you through either putting you into a default provider or you can contact a new provider directly to start with someone new.
You can change sooner if you wish. Often the application process is quick, efficient and online.

 

Given it’s such an integral part of the New Zealand landscape, it’s unlikely KiwiSaver will drastically change.

 

If you find yourself back to square one, given all the money went into the house, or reading this has you thinking that now is the time to be proactive about your retirement savings, head on over to kiwisaver.govt.nz and do some digging. You’ll see the different ways you can use your KiwiSaver, the different investments you can spread your money across, see what a good performing KiwiSaver looks like and what happens to all the money if you die before 65.

 

And while you’re online, Google “KiwiSaver providers in New Zealand” and you’ll have some reading to do (176,000 options in 0.68sec, no less).

 

Simon O’Neill is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

 

How to get free money with KiwiSaver

It’s May already? With the year flying by Alex Barendregt shares how to get free money* from your KiwiSaver before the end of June.

It may come as surprise to hear that our government actually hands out free money* to everyone that contributes to KiwiSaver. This free moolah comes in the form of Member Tax credits.

So, how much can I get?

Well, that all depends how much you put into it. The government will pay fifty cents for every dollar of member contribution annually, up to a maximum payment of $521.43.

This means that you must contribute $1,042.86 annually to qualify for the maximum payment of $521.43.

For most people, this will happen automatically as they contribute a minimum three per cent of their income to KiwiSaver. This will take them over the threshold fairly easy.

However, if you have not been contributing due to a KiwiSaver holiday or youʼre self-employed or you were without a job, it could still work for you. Here’s how …

You may have heard the saying, "The best time to plant a tree was 20 years ago. The second best time is now!” In the KiwiSaver context, if you plant that metaphorical tree before the end of the KiwiSaver year (1 July to 30 June) by putting in some extra funds manually you will benefit from this government incentive this year.

So, now’s the time to get cracking. Put some money into your KiwiSaver and get it topped up with some free money from the government.

If you don’t have a KiwiSaver or have some questions around it, feel free to contact Alex for an obligation-free chat.

 

Fun Fact: Last year the government set aside $500 million for Member Tax Credits that were unclaimed by participants. It’s sitting there waiting for you. Go and grab it!

 

*Free money relates to Member Tax Credits.

Sources: http://www.stuff.co.nz/business/money/10506702/KiwiSavers- missing-400m

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request

Is Property Investment the Answer for Retirement?

There are many options when saving for retirement. So, what happens if we go down the property investment route? What are the risks? And does it guarantee an income for retirement? Debra Halton explores with her top five tips

1) What goes up must go up … or can it also go down?

Property investors seeking capital gains can get tripped up by their belief that prices only ever go up. Historically, property prices typically experience net gains over time, but they also move through cycles. For example, for a long period, the Wellington market has sat in a kind of stagnate position. Wellington homeowners will see that the majority of growth in their homes over the past decade has taken place in the most-recent 12 months. 


2) Make the most of leveraging

The beauty of investing in property is the ability to leverage borrowed funds in order to boost returns. For example, suppose I buy a $500k house with a $100k deposit. If the value of that house were to go up by five per cent in a year, my equity in the house becomes $125k at year-end.

 

Over time, this ability to increase equity as a result of borrowed funds builds up, meaning you can then take equity out and choose to re-invest in another property.

 

3) Play the long game

Property investment is not about short-term gain. For reliable results, you need to be in it for the long haul. Historically, over a 10-year period, property prices may double, but there is always the risk of the market realigning and values dropping. We are seeing this right now in Auckland where prices seem to be dropping slightly, with stories of people selling under their listed sale prices. 
 

4) Recruit your dream team

Property investors can avoid mistakes by getting good advice. This means teaming up with an accountant who has experience in property investment, a lawyer who sets up the right ownership structure (i.e. you may need a trust, a look-through company or a partnership—trusts are great for assets protection but can be bad for tax efficiency), and a mortgage broker. 


On the last point, getting money from a bank can be relatively straightforward, but finding the best lender for your needs and structuring the mortgage in a way that pays down the debt as fast as possible and suits your situation is where mortgage brokers really come in to their own. Plus, the mortgage broker will help you review things regularly in response to changes in the market and your own circumstances.
 

5) Let the managers manage

Increasingly, few landlords are able to manage their own properties. Aside from the demands of modern life, the ever-changing regulative rules surrounding rentals can be daunting to get your head around and keep on top of.

 

We suggest employing a property manager. They charge approximately eight per cent of the rent. It's a small price to pay for peace of mind. And, for some landlords, not having the stress of dealing with tenants is worth the drop in rent returns. Besides, how often do we, figuratively speaking, “do a drive by” or “unblock the drains” of our KiwiSaver accounts? We leave that for the financial investors to manage. So, why do we try to “do it all” with property?
 

In summary …

To improve your chances of living off property in your retirement, get advice, surround yourself with experts, play the long game, leverage, and be aware of short-term cycles.

 

Will you have enough money to live off? Well, no one has a crystal ball and most agree that doing something towards retirement is better than nothing. 

 

Debra Halton is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

KiwiSaver's "Free Money"

We are well and truly into the New Year, the financial year is drawing to a close, but did you know you could greet the New Year with some free money? Alex explains.

 

People are often surprised to hear that the government actually hands out free money to everyone who contributes to KiwiSaver. It comes in the form of Member Tax Credits.

 

So how much Member Tax Credits (a.k.a “free money”) can you get?

 

That all depends how much you put in to KiwiSaver. The government will pay 50 cents for every dollar a member contributes annually up to a maximum payment of $521.43. This means that you must contribute $1,042.86 annually to qualify for the maximum payment of $521.43.

 

For most people who haven’t opted out for KiwiSaver, this will happen automatically by contributing (a minimum) three per cent of their income on KiwiSaver. For most full-time workers this will take you over the $1042.86 threshold.

 

However, if you have not been contributing due to a KiwiSaver holiday or you are self-employed or you have been without a job, KiwiSaver’s Member Tax Credits could still work for you.

 

To explain, you may have heard this saying: "The best time to plant a tree was 20 years ago. The second best time is now!” As in previous mentioned situations, you are still eligible for KiwiSaver’s “free money” by manually adding some extra funds to your KiwiSaver. If you do this before the end of the KiwiSaver year (this year runs from 1 July to 30 June) you will receive this year’s Member Tax Credits.

 

If you don’t have a KiwiSaver or have some questions about it feel free to contact me for an obligation-free chat.

 

Fun Fact: Last year the government set aside a whopping $500 million of Member Tax Credits that were unclaimed by participants.

 

Also read this helpful Stuff.co.nz article:  http://www.stuff.co.nz/business/money/10506702/KiwiSavers-missing-400m

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request

Put Money on the Mortgage or into KiwiSaver?

It’s a common question that we get asked. You’ve got a mortgage and you want to pay it down, but you’d also like to save for the future through KiwiSaver. O, what to do? Rupert provides some insight.

 

Note that the following is very much generic advice. For more personalised advice you would need to see a wealth adviser.

 

In general, there are two groups of people that we can divide our answer into: self-employed and employed.

 

For the self-employed, the answer is fairly simple. There are currently no real benefits for putting your money into KiwiSaver except the ~$521 per year Tax Refund that you receive from the government (50c from the government for every $1 you put in up to a maximum from you of $1042 per year). 

 

So, in my opinion, every self-employed person who can afford it should have an automatic payment of $20 per week (or $40 per fortnight etc.) that is put into your KiwiSaver. Why? Because that $1042 would earn you ~$44 per year in interest and you receive a further $521 from the government. That’s a return of more than 50 per cent each year. It’s a no-brainer.

 

For employed people, you need to know the maximum percentage your employer is willing to match on your KiwiSaver deposits. For most employers, if you put in 3 per cent, they will put in 3 per cent (you lose tax on this, but it’s still a good deal). The best I’ve ever seen is if you put 9 per cent in, the employer will put in 13.5 per cent (so after tax, you get 9 per cent from them too). You would be absolutely mad to not put in that 9 per cent into your KiwiSaver. You are literally doubling your money.

 

Once you’ve sorted out the decision above, the question of how much money to put into KiwiSaver gets significantly more difficult. It involves weighing up post-tax profit in KiwiSaver versus non-taxable and taxable interest in your mortgage.  It’s hard. Certainly too hard to summarise in a blog.

 

But you can get those low-hanging fruit. Firstly, get joined up to KiwiSaver. If you’re self-employed and can afford it, get that automatic payment set up. If you are employed, find out how much your employer will match if you put money in and, again, if you can afford it, begin putting that money into your account.

 

Rupert Gough is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Will You Receive Your Full KiwiSaver Member Tax Credits (MTC)?

Whether or not you receive your full KiwiSaver Member Tax Credits (MTC) is an important question, but you’d be surprised how many people don't know the answer. Jaimie helps bring some certainty and explains why you need to act on this before the end of the month.

 

If you're 18 or over, for every $1 you put into your KiwiSaver account, between 1 July and 30 June the following year, the government will put in 50 cents, up to a maximum of $521.43 per year.

 

The government puts aside enough money to cover the Member Tax Credits for everyone who is eligible. However, can you believe that over $300 million went unclaimed in 2015 alone? Who said, "I'm not going to worry about it, the government can keep my money?" NO ONE EVER!

 

It doesn't matter whether you are an employee or self-employed. If you are employed and are in a KiwiSaver scheme you will be contributing either 3, 4 or 8 per cent of your before-tax pay and your employer is required to match this with a minimum contribution of 3 per cent.

 

This essentially means that as long as your before-tax pay is more than $8690.50 annually OR you are self-employed and contribute at least $1042.86 before 30th June you will receive your maximum Member Tax Credits (or what I like to call FREE MONEY).

 

For self-employed folks this works out to making a minimum contribution of around $20 per week. And if you haven't done this yet, and have some funds set aside, you can also make a lump sum deposit before 30 June.

 

Where else can you receive a guaranteed extra 50 cents on the dollar?

 

If you would like to dig a little further regarding your KiwiSaver benefits or you just want sound mortgage advice on what options are available to you please give us a bell.

 

Jaimie McDonald is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

KiwiSaver Basics 101

The two questions asked time and time again by first home buyers are “How can I possibly afford my deposit?” and “Are my KiwiSaver funds REALLY accessible?” Jaimie sifts through all the confusion and media hype KiwiSaver for first-home buyers 101.

 

There is plenty of confusion out there surrounding how much you can borrow from your KiwiSaver. Add to this the way the media focuses on regional house-price caps such as $550,000 for Auckland (or $450,000 for Wellington) in a market where the median house price has just topped $940,000 and the possibility of using KiwiSaver funds immediately disappears in the minds of many potential new buyers.

 

With that in mind, it's probably a good time to clarify the difference between the two options available from KiwiSaver.

 

So the first option is the KiwiSaver First Home Withdrawal. For this there is no regional cap and no maximum on your income.

 

Any first home buyer who is a New Zealand resident and has contributed to their KiwiSaver for a minimum of three years can withdraw ALL of their KiwiSaver savings for the purchase of their first home (except for the initial $1000 kick start). OR if you haven't used your KiwiSaver withdrawal previously and are in a similar financial position as a first home buyer again, you may qualify for the Second Chance Home Withdrawal.

 

The second option is the KiwiSaver HomeStart Grant. This is where the cap and income limit comes in.

 

The HomeStart Grant is basically a FREE gift from the government and can be combined with your First Home Withdrawal. It works like this: If you're a single buyer with a total income under $80,000 or under $120,000 for two or more buyers and have a deposit of at least 10 per cent (including the grant) you may qualify for a one-off contribution of up to $20,000 per couple. The amount available is determined on how long you have made regular KiwiSaver contributions and whether you are purchasing an existing or newly built home.

 

So, with the potential to receive one or both of these funds, all of a sudden you’re a good step closer to that first home!

 

If you would like further information regarding KiwiSaver or sound mortgage advice on what options are available to you please don’t hesitate to contact us. 

 

Jaimie McDonald is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.