Helen Twose

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: Payment frequency's your choice

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Members can choose to pay a lump sum annually or irregular small amounts to qualify for government tax credit.

Photo / Thinkstock
Photo / Thinkstock

I'm a stay-at-home mum and have kept up my investment in KiwiSaver after finishing up at work with the minimum investment needed to qualify for the government top-up.

I just put it in when my provider sends me a letter to remind me of the cut-off date (sometime in June?).

Is it possible to deposit smaller amounts during the year? And if so, what is the difference between doing it this way and the lump sum. It would be easier to budget for regular payments.

One of the key benefits of KiwiSaver is the member tax credit, which is an annual contribution the government will make towards your KiwiSaver account if you are aged 18 or over and have made contributions during the year.

The government pays 50c for every dollar you contribute up to a maximum payment of $521.43. To get the full member tax credit each year you need to have contributed at least $1042.86 in the 12 months before June 30 each year.

You can make this 'top-up' payment anytime throughout the year, either as a single lump sum, or via smaller irregular payments, or as a regular contribution set up with your KiwiSaver provider.

To receive the maximum member tax credit entitlement you would need to set up a regular payment of around $87 per month, or $261 every three months.

Something to think about is that regular payments can help lessen the risk of investing a large amount at the wrong time, ie just before a big drop in the market.

By making regular contributions you can benefit from a process called dollar-cost averaging. Put simply, this means that by spreading your contributions over a period of time, you can help smooth out some of the fluctuations in the entry price of your fund.

Finally, it is important to note that any member tax credit will be paid into your KiwiSaver account and it is not a tax refund that gets paid directly to you.

•Sean Butler, Fidelity Life investment specialist.

I'm about to go on maternity leave for 12 months. What happens to my KiwiSaver contributions while I'm away from work?

If you're on maternity leave and your employer is not making any payments to you (that is you're no longer earning wages or salary), your KiwiSaver contributions will stop automatically.

They will not be deducted from your government-paid parental leave. Payments restart when you return to work.

You can contribute directly to your KiwiSaver scheme via either lump sum payments or regular payments from your bank account.

If you negotiated a paid maternity leave situation with your employer (in addition to any government support) your KiwiSaver contributions will generally continue (including the employer contribution) unless you take a contributions holiday. It would pay to confirm the details of your individual contract with your employer.

•Donna Nicolof, BNZ head of wealth and private bank.

Recently I made inquiries about my KiwiSaver balance.

I haven't been paying too much attention to how it all works. All I know is a bit comes out of my weekly pay.

When I found out who my default provider was (ASB) I went online to just browse around and check it out.

Something looks out of place to me and I was wondering if you could shed some light.

When I go on to my ASB KiwiSaver web page and scroll down to "view transactions", then select summary for a time period of 24 months it says, opening balance as at 13/2/11 is $0.00.

Then in the column below it says "money in" $7644 with my, my employer's and the government's contributions. Then below that it says cash transferred from "member cash" $3325.

Then in the next column it has "money out" cash transferred to investment fund $3325, leaving me with a balance of $4473.

Was that money transferred mine in the first place or just a part of ASB's way of trading members funds or whatever, if you know what I mean.

It's all a bit confusing to this labourer from the Waikato.

No one at ASB or IRD made any sense to me so if you could put it in easy English for me it would be appreciated.

The best place to view a summary of your KiwiSaver account and contributions (by type) is the 'Investment Overview' page (log in to FastNet Classic and click the ASB KiwiSaver Scheme link on your Balances page).

Prior to August 30, 2012 your contributions went through a member cash account before being invested into your chosen investment fund(s).

Yes, the 'cash transferred from member cash account' is your member contributions, employer contributions and government contributions moving from your cash account into your investment fund(s).

We upgraded our system on August 30, 2012 removing each member cash account, so your contributions are now invested directly into your chosen investment fund(s).

We sincerely apologise that you did not get the information you were looking for from ASB and encourage you to contact us again on 0800 ASB RETIRE (0800 272 738) to discuss any questions you have about your KiwiSaver account and the information available online.

•Blair Turnbull, ASB executive general manager of wealth and insurance.

•Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the NZ Herald's panel of industry players, email Helen Twose, helentwose@gmail.com.

- NZ Herald

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