Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: Tax credit stops when you travel

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People can pay into their accounts while overseas, but will not get the government contribution.

Your KiwiSaver account will be waiting when you get back from overseas. Photo / Getty Images
Your KiwiSaver account will be waiting when you get back from overseas. Photo / Getty Images

I'm about to head off on my OE. I'm not sure how long I'll be away but want to be clear on my obligations for KiwiSaver.

Do I need to arrange a "holiday" for my payments?

Can I still get the tax credit if I make the $1042 deposit required?

If you leave your job here and travel overseas your KiwiSaver employee contributions will cease automatically.

If you already have a direct debit set up you will need to advise your provider if you wish to cease the payments.

A KiwiSaver payment holiday arrangement is required if you stay in a job and you want your automatic salary contributions to cease for a time.

Check with your KiwiSaver provider but you should be able to contribute directly into your account while you are overseas.

When you leave New Zealand you should inform both the IRD and your KiwiSaver provider of the date you are leaving.

For the period of time you are not in New Zealand you are no longer eligible to receive the member tax credit.

You will, however, be eligible for the portion of the KiwiSaver year (July 1 to June 30) you were living and working here.

•Sarah Mitchell, Milford Asset Management retail product manager.

Q: I'm in KiwiSaver and have been with Russell LifePoints Growth since the start of July 2007.

I was interested in the Herald's Fundsource commentary, assessment and comparison of various KiwiSaver funds.

Unfortunately they didn't include Russell and I'd be very interested to learn how this fund is performing with the view to changing if it's not that flash.

Of course Russell themselves talk it up, but I've yet to find anyone independent who can advise me.
The Russell LifePoints Growth Fund is part of the Aon KiwiSaver Scheme.

Aon New Zealand provides the funds and all the administrative services of the scheme.

However, the Aon KiwiSaver Scheme uses a number of external investment managers for their funds, with Russell Investment being one of them.

Russell Investment Management is a global investment company founded in 1936 with $190 billion invested in their funds globally.

Russell Investment Management manages eight KiwiSaver funds for the Aon Scheme, including four LifePoints diversified portfolios, with the Russell LifePoints Growth being one of them.

This growth fund aims to provide investors with capital growth over the longer term by focusing on growth assets and therefore the fund may experience fluctuations in capital values in the short term.

As at March 31, 2013 the fund size was $11.44 million - a relatively small fund, below the FundSource Diversified Growth Sector average of $48 million.

This fund sits in the FundSource KiwiSaver Diversified Growth Sector as it has exposure to both growth assets (such as equities) and income assets (such as bonds).

In order to be included in this sector funds must have at least 70 per cent of their holdings in growth assets.

As at March 31, 2013 the allocation to growth assets represented 74.1 per cent of the fund.

The sector average as at December 31, 2012 was 78.3 per cent so the fund is slightly on the conservative side of the growth funds.

It has a lower allocation to Australasian shares at 14.8 per cent compared with the sector average of 29 per cent, but a higher allocation to international shares (50 per cent) than the sector average (42.2 per cent).

It also has a significantly higher allocation to international bonds (20.8 per cent) compared with the sector average (4.6 per cent) but a lower allocation of Australasian bonds (5.2 per cent) compared with the sector average (6.9 per cent).

The performance of the fund is as follows:

Over a 12-month period as at March 31, 2013, the fund has returned 13.91 per cent, underperforming the sector average of 14.63 per cent.

Over a three-year period on an annualised basis it has outperformed the sector average of 7.24 per cent by returning 8.81 per cent.

Over a five-year period on an annualised basis it has slightly underperformed the sector average of 5.38 per cent by returning 5 per cent.

But this sector average contains a small number of outliers that pushed the average return up.

Therefore, when looking at the overall ranking of funds in the sector for comparison it has ranked in the top third of funds over a three-year period and slightly above middle of the pack in terms of performance over a five-year period.

From May 2013, FundSource will be including the Aon KiwiSaver Scheme in its Research Services, including monthly performance tables and weekly fund tables published in the Herald.

•Owen Batchelor, FundSource analyst.

Q: My 18-year-old son has just started working a part-time job and as a result has been automatically enrolled in a KiwiSaver provider.

As much as possible I'd like him to think about his KiwiSaver options and make a decision about what type of fund he is in, which provider, what amount to contribute or even, whether he shouldn't just take a contributions holiday and put his money towards savings goals.

What are the main things someone of his age should be taking into account with regard to KiwiSaver?

While retirement is a long way off for an 18-year-old, the first-home withdrawal feature makes KiwiSaver a great savings vehicle for those looking to buy their first home as members can access both their own and their employer's contributions to assist with the purchase provided they have been enrolled in KiwiSaver for at least three years.

I think the two most important things are getting started early and making sure you're in a fund that's appropriate for your savings goals.

When choosing a KiwiSaver scheme, there are a range of factors to consider including investment options, communication, fees and performance.

There is a KiwiSaver investment funds checklist on the Sorted website - - which is worth checking out.

•Kate Armstrong, Westpac Head of Investments 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 Herald's panel of industry players email Helen Twose,

- NZ Herald

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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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