I would be grateful if you could clarify something for me. I have been in KiwiSaver for three years and will be 65 in March next year. I am going to reduce my weekly hours but continue to pay into my KiwiSaver. Does my employer have to make contributions too? I was under the impression that my employer would have to continue to contribute until I reached five years of my membership which would be in August 2018. I have been informed by some office staff that employer contributions cease when I reach the age of 65 regardless of how long I have been a member of the KiwiSaver. What in fact is the right answer?
You are right, and they are wrong. It appears that the office staff you have spoken to are not quite up to speed on employer KiwiSaver obligations.
KiwiSaver is administered by Inland Revenue, both in respect of government contributions as well as the employee and employer contributions made through PAYE returns.
Information on employer obligations can be found on the IRD website and in various guides including the K24 KiwiSaver Employer Guide.
The IRD website states that employers are required to contribute if their employee "has not reached the age of eligibility for New Zealand Super (currently 65), or has not been a member of a KiwiSaver scheme or complying fund for five years, whichever date is later".
You will not reach your five year anniversary until August 2018, therefore your employer should continue their contributions until that time. As you will be working reduced hours the dollar amount will be less, but it should still amount to 3 per cent of your wages.
The K24 KiwiSaver Employer Guide gives more detailed information to employers.
It explains that employers " ... can stop member contributions when an employee reaches the date they're entitled to withdraw their savings (their withdrawal date), unless an employment contract or similar agreement requires you to continue with these payments".
You should not need to tell your employer when to stop making contributions. The K24 guide advises employers: "Don't cease employer contributions until you receive a letter from Inland Revenue advising that an employee has reached their withdrawal date."
Some employers opt to continue making their 3 per cent contribution past this date, and they can do so if they wish. These are voluntary contributions (the same applies to members under the age of 18).
You will also be entitled to Member Tax Credits until you reach your withdrawal date. If your reduced hours mean that you are contributing less than $1042 yourself over the 12 months to June 30 each year, then you can top up your KiwiSaver account with the difference to get the maximum Member Tax Credits of $521.
Your KiwiSaver provider can help you with these calculations. Note that the calculations are based on the date the money is deducted from your wages, not the date it reaches your fund manager (this is important for those payments that are deducted in June but don't reach your provider until July).
Anyone who believes that their employer is not fulfilling their KiwiSaver obligations should speak to their employer.
If this is difficult or you can't reach agreement, then you can address any queries and complaints to Inland Revenue. Go to www.kiwisaver.govt.nz for help on how to do this.
- 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