Q I opted out of KiwiSaver when I started work two years ago as I had to pay off a student loan and other debts. I now want to opt back in. How do I go about this, and will I still get the $1000 kickstart?
A As you probably know, most employees when starting a new job are automatically opted into KiwiSaver. Some of the exceptions are those under 18 or over 65, people who are not entitled to live in NZ indefinitely, casual workers and those employed on a temporary contract of less than 28 days.
Workers who are opted in have to wait two weeks before applying to opt out and they will then be refunded any KiwiSaver contributions deducted by their employer to date. The purpose of the two weeks' wait is to give workers some time to see the impact that KiwiSaver has on their pay packet. It also recognises that inertia is the preferred course of action for most of us - the "do nothing" option. Most workers who are opted in automatically do not get round to 'opting out' within the two-to-eight-week timeframe, and stay in KiwiSaver.
As you opted out within the required timeframe, it means that you have never been a member of KiwiSaver, so you will now be joining as a new member with all the usual entitlements. Just be warned that signing up voluntarily means that you can't change your mind and opt back out again. You would have to wait 12 months and then apply for a contributions holiday.
As an existing employee all you need to do to join KiwiSaver is download a KS2 form from the IRD website and give it to the person in charge of payroll at your workplace. A verbal instruction may work, but filling out the correct form is better as it is a tangible reminder to that person to set it up - with the rate of your choice - in the payroll system. You can choose a rate of 3 per cent, 4 per cent or 8 per cent for your contributions. Your employer's rate is set at 3 per cent, so selecting 4 per cent or 8 per cent for yourself will not change that.
If you wish to join a particular fund manager's KiwiSaver Scheme then you will need to fill out the application form at the back of their investment statement and send it to them. They will notify Inland Revenue of your choice, and when your contributions come through from your employer in their PAYE returns, Inland Revenue will in due course forward these, along with the $1000 kickstart, to the fund manager of your choice. Allow up to three months for these first contributions to reach the fund manager.
If you don't choose a fund manager you will be randomly allocated to one by Inland Revenue.
The default schemes are all conservative. You can allow some time to become familiar with your default fund manager, before choosing to stay or switch. While your fund balance is low you can educate yourself on investment strategies, asset allocation, fee disclosure and all investing issues. KiwiSaver is well regulated by the Government and you should expect prudent investments and a good level of communication from your fund manager. Most have dedicated staff to talk to investors like you, so don't hesitate to pick up the phone if you have any questions.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not intended to provide personalised advice. Send your KiwiSaver questions to firstname.lastname@example.org.