Kiwisaver Changes

Kiwisaver changes effective 1 April 2019

The changes that have taken effect on 1 April 2019: 

You have more options around the amount that you can pay into your KiwiSaver

At present, if you are a salary or wage earner, you have been able to contribute 3%, 4% or 8% of your salary into your KiwiSaver. 

From 1 April, you also have options to contribute 6% and 10%.   

This is great!  

I have found that the difference between 4% and 8% was just too much for some clients.  

The 10% option is great for the late starters, who need to make a strong run to get some money set aside for their retirement years. 

I would strongly encourage you to sit down and work out if you can afford to pay MORE into your KiwiSaver in 2019.    

You can change your contribution amount once every three months, unless your employer has a restriction in place around this so do enquire. 

If you decide to go for a larger amount and can’t quite keep it going, you can change it back.  

Download the KS2 form to change your contribution rate from the IRD website – this has to be given to your payroll person. 

Contributions holidays are being changed

The current law refers to a break in KiwiSaver payments as a “contributions holiday” and this name is being changed to a “savings suspension”.  Whereas you previously could apply for a break of up to 5 years, this has been reduced to 12 months to encourage people to restart their savings. 

Member tax credits are being renamed as “government contribution”

This is a much clearer reference to what this payment actually is! 

There are also other changes in the pipeline…..

More options for people over the age of 60 from 1 July 2019

It is proposed that people over the age of 65 will be able to open a KiwiSaver after 1 July. 

Currently people over the age of 65 cannot open a KiwiSaver. 

Investors over the age of 65 will not qualify for a Government contribution and there will still be no legal requirement for an employer to contribute once an employee is over the age of 65. 

Currently, there is a minimum 5 year contribution period before you can withdraw your funds. 

If you were to open a KiwiSaver at age 62 and start contributing, you would not be able to access your funds until you had reached the age of 67. 

Government contributions will be paid for 5 years from the opening of a KiwiSaver account, no matter how old you are.  

The proposal is that the minimum contribution period before withdrawal is going to be removed for KiwiSavers which are opened after 1 July 2019.    The locked in period will be removed for all existing KiwiSavers from 1 April 2020.   

This makes KiwiSaver an attractive offer for older people who have not opened a KiwiSaver to date. 

The funds will not be locked in, but investors can get the Government contributions for 5 years or up to the day that they withdraw – whichever comes first. 

Janet Natta is a financial adviser and director of Smart Money Advice, offering investment portfolio construction and management services to clients throughout NZ, as well as comprehensive financial planning advice to assist clients to build and protect wealth to achieve their dreams.
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