I joined KiwiSaver on 9 August 2013. Next year I shall be 65 years old and I intend to continue working. Can I still make contributions? If so, does my employer have to continue to contribute as well?
Usually when a KiwiSaver member turns 65 their account is "unlocked". This event is called the "end payment date" and is linked to the age of eligibility for NZ Super, which is currently 65 years of age.
However, as you joined in August 2013, your account will be unlocked after 5 years of membership, or 9 August 2018.
Until that time, everything will continue as usual - your contributions will continue, as will your employer contributions. You will also be entitled to Member Tax Credits up until that date (pro rata for the weeks from 1 July until 9 August 2018).
Once you reach the end payment date you can remain in KiwiSaver and continue with your employee contributions.
If you have a change of heart and wish to stop your contributions at that time, you should fill out a KS51 non-deduction notice and give it to your employer.
That is still not the end of KiwiSaver for you - assuming your KiwiSaver account remains active you can resume your contributions at a later date by giving your employer a completed KS2 form.
KiwiSaver members over the age of 65 can continue with their accounts for as long as they wish, and they can also change funds or switch from one provider to another.
However, if they withdraw all their funds and close their account it cannot be reopened - as only those under the age of 65 can join KiwiSaver.
Your employer is no longer obliged to continue making their contributions once you have reached your end payment date, unless this is specified in your employment agreement.
Some employers choose to continue making contributions. Indeed, some employers do not know their employees' dates of birth, and will only cease their contributions at the end payment date if they are notified by Inland Revenue.
Any withdrawals from your KiwiSaver account are tax-free. Your fund manager should contact you a month or so before you reach your end payment date, to set out your options at that time.
They would like members to continue using their KiwiSaver accounts beyond the end payment date, as they earn management fees on each account.
It also makes it easier for them to fund withdrawals and manage liquidity, if members do not cash up all their savings as soon as they are able.
With the growing number of members reaching their end payment date, providers must have sufficient funds invested in reasonably liquid assets so that these people can be paid out, should they ask for their money.
Fund managers will be heartened to know that there is a growing trend for people to leave their money in KiwiSaver after the end payment date.
This is largely due to the higher returns many KiwiSaver funds have delivered, compared to bank term deposits.
ANZ recently conducted research as part of its latest Retirement Savings Barometer and found that just 27 per cent of the people surveyed would take all of their money out of the savings scheme at 65, down from 35 per cent last year.
As long as bank term deposit rates remain at current low levels, the number of those staying on in KiwiSaver past 65 is likely to continue to grow.
- Shelley Hanna is an Authorised Financial Adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to firstname.lastname@example.org.