Helen Twose 's Opinion

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: No need to contribute while on OE

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Contributions holiday is automatic when people leave, but lump sum payments can be made at any time.

People heading off on their OE can remain KiwiSaver members but won't receive all the benefits. Lump sum payments can be made while away. Photo / File
People heading off on their OE can remain KiwiSaver members but won't receive all the benefits. Lump sum payments can be made while away. Photo / File

I'm about to head off on my OE.
With travel and work I'm not sure how long I'll be gone. The plan is to save for a house deposit while I'm away. If I'd not travelled and stayed in New Zealand I think I would also continue to contribute to KiwiSaver but I'm not sure what to do when I go on my OE. Can I take a contributions holiday and how long do they last? At this stage I don't have a set end-date for my travels. Is it worthwhile continuing to contribute?
I don't get the government member tax credit top-ups or my employer kicking in like I would in New Zealand. Thoughts?

When you head off on your OE you can remain a KiwiSaver member but won't receive all the benefits.

If you were working in New Zealand before heading abroad, your contributions will automatically stop when you leave your employer and contributing to KiwiSaver while overseas will be up to you.

There's no requirement for you to contribute while you are overseas so you don't need to take a contributions holiday.

You can make voluntary contributions (or lump sum payments) at any time, either directly to your KiwiSaver provider or through Inland Revenue.

Note, unless you're a government employee living overseas or volunteering or working overseas for token payment for a specified charitable organisation you won't receive the member tax credit or any employer contributions when you make contributions while living overseas.

A contributions holiday is for employees who want a break from making KiwiSaver contributions from their pay, but as you will be overseas and not working in New Zealand (and not a government employee serving outside New Zealand) there's no need to apply for a contributions holiday.

Even without the additional benefits you may still want to consider contributing to your KiwiSaver account while you're overseas.

KiwiSaver schemes are generally well diversified with lower fees than many other managed fund investments and when you return to New Zealand you may be eligible to withdraw some of your KiwiSaver savings to help you buy your first home.
*Fiona Oliver, AMP general manager wealth management.

I will soon be working as a self-employed contractor. At the moment I am in waged employment and signed up to KiwiSaver, contributing 3 per cent a week plus employer contributions. What are my obligations to KiwiSaver as a self-employed person? Does it change much?
What is recommended?

You don't have to be an employee to be part of KiwiSaver, but the rules are a bit different.

If you will not receive PAYE income as a contractor - for example, if you are going to invoice for your contract work - your employment status will change to self-employed and you will not be required to make any contributions to your KiwiSaver account.

You can still make voluntary contributions to KiwiSaver whenever you want to - although you will need to check with your provider if there is a minimum amount to contribute.

You won't get employer contributions, but you will still be eligible for the maximum "member tax credit" of $521.43 from the government provided you contribute at least $1042.86 per KiwiSaver year and you continue to reside in New Zealand. If you are self-employed and your income is subject to PAYE deductions, you will be considered an employee for the purposes of KiwiSaver.

This means the KiwiSaver contributions minimum of 3 per cent will continue to be deducted from your gross salary or wage, and you must also make the minimum employer's contribution of 3 per cent.

If that is not what you want to do, provided you have been a KiwiSaver member for at least one year, you could consider taking a contributions holiday, where any contributions are made by you voluntarily and you would not be required to make employer contributions.

You can take a contributions holiday of between three months and five years.

There's no limit to the number of times you can take a contributions holiday.
*Joe Bishop, Gareth Morgan Investments head of retail wealth and marketing.

I have been working with my current boss for coming up three years. When I left my previous job I was in KiwiSaver and assumed as I was not given an opt-out form that my new employer carried on with it. I never received pay slips but I am on PAYE so could not see the contribution to KiwiSaver. When I went to my bank to open a new account about two months ago they asked if I would like to look into changing where my KiwiSaver was at. That is when I found out I was no longer in KiwiSaver. I asked my employer about it and he laughed and said it was a waste of time.
I am not sure how he opted me out as I thought I had to sign the form to opt out of it. I am wondering what I do now.

It would appear from your letter that you may not have informed your new employer that you were a KiwiSaver member and the new employer may not have commenced making KiwiSaver deductions from your salary.

It is difficult to see how the employer could have opted you out of KiwiSaver without your knowledge.

The decision on whether to opt out is made by a new provisionally enrolled member at the beginning of their membership - not by the employer.

Depending on the amount of time you have been a member, it could well be too late for you to choose to opt out of KiwiSaver. Therefore, based upon the information provided, it seems likely that you are still a KiwiSaver member.

You can check your KiwiSaver membership status by contacting Inland Revenue or by talking directly to your scheme provider.

You should also give your employer a completed KS2 form to get the deductions and contributions started with your new employer.
*IRD spokesperson.

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

Helen Twose

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose is a freelance business journalist who writes regularly about KiwiSaver and entrepreneurial companies. She has written for the Business Herald since 2006, covering the telecommunications sector, but has more recently focused on personal finance and profiling successful businesses.

Read more by Helen Twose

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