KiwiSaver First Aid
Apr 22, 2018
Don’t discount this blog post as another boring one about KiwiSaver! Think of it instead as a blog post about SUPER-exciting-annuation and an opportunity to make sure you don’t miss out on FREE money. Speaking personally, if I don’t act NOW, I’m about to miss out on my member tax credit and you might be too.
I am staging a KiwiSaver INTERVENTION on myself! Today’s post is an excellent example of “no one looks after my money as well as I do”. I have to fix up my KiwiSaver account, but it’s OK, I’m trained in KiwiSaver First Aid!
The end of year is nearly upon us for our KiwiSaver accounts, 30 June is their cut off (Sorted say you should take action by ‘mid’ June), and I took the time to look at my balance and my contributions and make sure I have personally put $1042.86 into my fund in order for me to get the government tax credit of .50c in the dollar i.e. $521.42. No one else is going to point out to me that I may have fallen short in my contributions, I have to take responsibility for my own fund. You do too.
I work part time, my hours are variable, therefore so are my contributions into my own fund. They are actually up and down like a yoyo. I have fallen well short of what I need to have put in there to get the full government contribution even though both my employer and myself have been contributing. Take note of this:
“To get the full member tax credit automatically you have to contribute at least $1,042.86 a year. Employer contributions, government contributions and amounts transferred from Australia under the Trans-Tasman retirement savings portability do not count towards eligibility for this credit.”
DING DING DING! It’s particularly important that you understand that your employer contributions DON’T COUNT towards that $1042.86. I think this is a requirement that could trip a few of us up. Nor do government contributions (like last year’s member tax credit which is sitting in your account). I did transfer my Aussie pension over a few years ago too, but it won’t have any effect on my entitlements this year.
My KiwiSaver is with Simplicity Growth (fees of $2.50 per month, yippee) so I have logged on and tallied up my own employee monthly contributions and any voluntary contributions I have made and they come to only $566. So I need to top up my account by $476.86 to make sure I get my full member tax credit of $521.42 from Jacinda Ardern, i.e. the government. I always knew that I was going to fall short so have been setting money aside for this top up.
Topping up is EASY, but I always feel nervous when the words “government and tax” are used in the same sentence. So once the house was nice and quiet and I could concentrate I just logged onto my internet banking, selected “tax”, chose the code they offered “KSS” (KiwiSaver Member Account), entered my IRD number, my name and the amount ($600, just to be safe) and BINGO it was done. Although contributions from my employer can take up to three months to hit my account, voluntary contributions coming from ME are a lot faster, probably about ten working days. I could also have paid by cheque but my daughter has taken over my cheque book (that I never use) and has been using it to write cheques for all sorts of random things like “Ten Hugs for Mum”. Great use of a cheque book aye!
If I didn’t top up my account I would still get something, a partial tax credit. If I only managed to put $566 in there myself I would still receive $283. But wouldn’t you rather get the whole whack? Yes, so would I.
Now, as with most things, there are several ways to achieve the same outcome. Simplicity also offer a way for me to pay into my fund voluntarily and they offered the following guide:
I phoned Simplicity just to double check and spoke to the helpful Craig (unbelievably he remembered me from the last time I called and I can’t say that has EVER happened when I speak to a help centre!) and he said that had I gone direct to Simplicity my money would have hit my account even faster, but what’s done is done! Your provider will offer you a similar options, just check with them.
And what about my husband Jonny? I don’t want him to be broke in retirement either. Well, he is self employed so we have been voluntarily contributing $90 each and every month to his fund. That is $1080 for the year and it just squeaks him over the $1042.86 threshold. And our daughter? Because she is under 18 years old, she is not entitled to any member tax credits. Despite this we still contribute $40 a month towards her fund. And if you are over 65 and receiving the government super, you are not eligible either, which I think is fair enough.
If you work for someone else and earn over $40K and contribute 3% of your wages you will already be contributing enough, but if you are on a low and variable income like me then PLEASE go and check your account.
And for any of you laggards who have NEVER managed to get around to signing up to KiwiSaver, or you incorrectly think that the government is going to run off with your money I just wanted to let you know that in the ten years the scheme has been operating I have personally received over $12,000 in contributions from the government and my employers. That is money I didn’t have to go out and earn myself but that is now in my fund and working each day on my behalf. On my 65th birthday (or 67th?) I’m going to unwrap my KiwiSaver present to myself and have access to my money for the first time and I’m going to thank myself that I had the foresight to start saving for my retirement at the young age of 34 when KiwiSaver started. Happy Birthday to ME! And as for my daughter, she is going to thank her mother that a KiwiSaver account was opened for her when she was BORN! 65 years of investing and cumulative interest - what a delightful thought!
There is no time like the present to make a start on your KiwiSaver or to switch your fund. Here is a link to the provider I use (I switched to them because they are transparent with the fees they charge unlike my previous provider ANZ). Make sure you sign up and don’t miss out next year: www.simplicity.kiwi
Happy Saving!
Ruth
I came across this excellent resource from the ever informative Mary Holm so if you are looking for a lot more information on KiwiSaver try this link: www.maryholm.com
