I am writing on behalf of my granddaughter. On graduating from university, she worked part-time and contributed to a default KiwiSaver fund. She is now married, living in Australia and contributing to an Australian super fund. She and her English husband have decided they would like to settle permanently in the UK, possibly in two years' time. She would like to close her KiwiSaver account as she has no intention of living back here. The balance is only $2129 (this includes the government kickstart). Is there any way she can exit the fund? By making no contributions and with her provider deducting their fees this will be eating into her balance.
You can find out how to access KiwiSaver early on the Government KiwiSaver website, under "Moving Overseas Permanently".
As your granddaughter is currently living in Australia, she should first read up on those rules.
From July 1, 2013, members are no longer able to withdraw their KiwiSaver funds early if they have moved to live permanently in Australia, but they can consolidate their savings by applying to transfer all their KiwiSaver savings to an Australian complying superannuation scheme.
You do not have to wait one year to make this transfer and all funds including the $1000 kick-start and member tax credits may be transferred.
Members will be able to access their KiwiSaver funds at the age of entitlement to New Zealand superannuation. Currently this is at 65 years of age.
Note that funds transferred to an Australian super scheme cannot then be transferred on to a super scheme in another country.
As your granddaughter is thinking about settling in the UK eventually, she could wait until she has been there for 12 months and then apply to close her KiwiSaver fund on the grounds of permanent migration. A successful applicant will receive all funds less any member tax credits.
What about fees? KiwiSaver fees have been in the headlines lately, and perhaps this has prompted your concern for your granddaughter's fund balance. As KiwiSaver balances grow, fees will increase as they are a percentage of the overall balance.
Fund manager profitability will also increase, and I expect they will reduce their fees to retain their customers and attract new ones.
The fees of default funds are generally lower than average, and the fees for the AMP Default fund are among the lowest.
The biggest fee that she is paying is the member fee of $26.40 per year, which works out to 1.2 per cent of her balance. On top of this she is paying an annual management fee of 0.41 per cent- around $9 per year on her current balance.
So currently your daughter is paying around $3 per month in fees. Does this sound unreasonable?
Fund managers rely on customers with larger balances to help cover the costs of those with smaller balances.
If and when your granddaughter moves to the UK, she will need to make a decision about her Aussie super. She could transfer her Aussie super to her KiwiSaver account, as a nest egg for her long term future.
That raises another question - is she in the right fund? If your granddaughter decides to retain her KiwiSaver long term she would probably be better off in a growth fund (although the fees would be slightly higher).
Her fund manager can help her with all these decisions - this service is included in the fees we pay.
- 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 of a general nature. Send KiwiSaver questions to firstname.lastname@example.org