KiwiSaver

It’s Time to Check Your KiwiSaver

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This time of year is especially important for the self-employed, but the rest of us can use the KiwiSaver “anniversary” to make sure we have it all dialled in properly. Here’s how.

 

The KiwiSaver calendar year runs 1 July to 30 June. The Member Tax Credit from the government (to a maximum of $521.43) will be paid out over the coming months, assuming you have contributed the minimum of $1,042.86.

 
If you’re PAYE, 18 or older, earning $35k or more, and have three per cent from your salary (and your employer matching that with three per cent) then you will have reached the threshold.


If you’re self-employed, then, as we hope you know, you’ll need to make voluntary contributions. You may have set this up with a direct debit from your account or perhaps you’re planning to make a lump sum to your KiwiSaver. If you’re the latter, pay those voluntary contributions today—you are running out of time.

 

If you need to make a voluntary contribution and think $1,042.86 is not in the budget, don’t be discouraged, you can still receive 50c on the dollar if you deposit anything up to $1,042.86. So, if you put in $500, the Government contribution will still be $250.

 

This “KiwiSaver New Year” is also a perfect opportunity to ensure that your KiwiSaver is set up right for you. That is, that you are not sitting in a default fund and that your tax rate is correct.

 

Default Funds
When it comes to the default funds it is simply the worst place for many savers to be, yet there is not an effective way by providers (or the government) to get those members to move.


The big problem with the default funds is they are largely invested in lower risk, lower return assets like cash and bonds (maximum investment in growth assets like shares is 25 per cent). The lower the return, the lower that retirement nest egg will be.


There’s more than $8b (yes, billion) invested in KiwiSaver now. The 400,000 KiwiSavers who are invested in default funds, missed out on an estimated $1 billion over the last 8 years.

 

The tax rate can be a game changer for you as well. Some Kiwi’s (around 120,000) are paying more tax than they need to. It, literally, can pay to have your tax rate (for Kiwisaver, this is your Prescribed Investor Rate or PIR) correct. If it’s wrong, changing it could make a difference of $26,000 for you in your KiwiSaver. That’s a significant chunk of a first home deposit—or your retirement income.

Google “KiwiSaver tax rate” and get yours in line.

 

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.

Setting up my kids for the future

If we find it challenging to buy a home, imagine what it might be like for our kids. Brendon shares what he’s doing to improve his kids’ home-ownership chances.

 

I have been responsible for bringing two boys into the world and I think my responsibilities don’t end there.

On a philosophical level, two of the key things I believe I need to do as a dad are to, firstly, do all I can to get them through to adulthood with a positive sense of self-regard. And, secondly, I need them to know that I think they are both awesome. The two ideas are, of course, related, but if I have done them then I think I have done okay. Stay tuned for progress reports.

Beyond the philosophical, there are some things on a financial level I want to do in order to set them up. 

I would really like them to be in a position to buy a house in the future (if they actually want to do that is up to them, of course). So the first thing I will do is to encourage them not to live in Auckland!

That aside, they have both been signed up for KiwiSaver. When I set this up they were eligible for the $1000 government kick-start (not available now) so I took that opportunity.

The second, and related, issue is around setting them up with some skills and habits towards working. 

My eldest, who is now 16, works five hours a week with me at Velocity Financial (I often wonder why all my scanned files show up upside down!). This is a little easier for me to organise than for some because I am also the employer. However, I still think this was one of my better moves as a dad. We gave him a formal interview and set him up on our payroll system officially. He has a job description and is accountable for his performance. He is living the dream!

He also contributes to his KiwiSaver. This is part of the home ownership plan.  We are using that to help him save for a deposit.

My youngest is 12 and he has just started a paper run. He is a contractor (hence, why they can get away with paying less than minimum wage and is paid on “weight” of delivery—just in case anyone is interested). The reason this is relevant, however, is that, because he is a contractor, his “employer” doesn’t pay KiwiSaver. So we have set up voluntary payments to his KiwiSaver.

To be fair, $2 per week isn’t going to get him into a house for quite some time. However, at this stage we are concerned about setting up the habits that will get him there.

All our great laid plans aside, it may be that when our boys are ready to buy a house they may still need our (my very patient wife and my) help. So we are working on a debt reduction strategy so we are in a position to do that. Investment property has also been part of our strategy to help get us there.

Let me finish with a quick sales pitch. Yes, at Velocity we can set your kids up for KiwiSaver and can talk debt reduction and financing investment properties. We can also point you in the direction of good lawyers we work with to make sure your affairs are structured in such a way where your kids will be looked after and a way that aligns with the plans you have for them.

Do feel free to get in touch!

Brendon Ojala 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.