Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: Hassle free rules encourage savings

Funds can take up to three months to enter members' KiwiSaver accounts but earn interest on the way.

The IRD picks up almost all of the administration responsibilities. Photo /  Supplied
The IRD picks up almost all of the administration responsibilities. Photo / Supplied

I've just joined KiwiSaver and have to admit I'm a bit confused as to what happens to my money after it comes out of my pay.
Am I right in thinking it goes to the IRD before going to my KiwiSaver provider?
Why is this and how long does it take to show up in my KiwiSaver account?
What if I decide to change providers - is this something the IRD manage or the providers?

That's a common KiwiSaver query and you're not the first member to find yourself a bit confused.

Your thinking is spot on - once your money is deducted from your pay, it is forwarded by your employer to the IRD.

This is how KiwiSaver is structured with employers and the IRD picking up almost all of the administration responsibilities.

This means it's hassle-free and automatic for employees, further encouraging them to save.

Employers also take care of PAYE tax, student loan and child support payments as part of the same process.

The only downside is the time delay as it can take up to three months for your money to reach your KiwiSaver account. This is due to the paperwork and numerous checks that employers and the IRD need to carry out.

However, while your money is sitting with the IRD it does earn interest and you should be able to see these interest payments on your KiwiSaver transaction statement.

If you decide to change providers, both the IRD and your new provider will manage the process. Your new provider will notify the IRD of your request after which all of your future contributions will be forwarded to your new provider.

Your new provider will also arrange a transfer of your funds from the old provider. This makes for a seamless transfer process for members.

While it can be a bit confusing at times, a lot of thought has gone into KiwiSaver to make it as easy for New Zealanders to save as possible.

•Vedran Babic, Fisher Funds operations manager.

I have decided to bring my Aussie super back to NZ but need to know if my life insurance attached to it remains active and travels along with my super to KiwiSaver after July 1.

The transtasman portability only applies to superannuation savings and does not cover insurance.

KiwiSaver is a stand-alone retirement savings scheme and is not directly linked with any other offerings.

You will need to check with your Australian superannuation/insurance provider whether your life insurance will remain active on its own if you proceed with the transfer of your Aussie Super account.

•Vedran Babic, Fisher Funds operations manager.

My partner has just bought his first home and has sent through his withdrawal request and first home deposit subsidy applications.
His KiwiSaver withdrawal should be no problem as it is with ASB which is also the bank his mortgage will be with.
The first home deposit subsidy is a bit trickier.
He has been a member of KiwiSaver since May 15, 2008 so just scrapes in with the five years and hopefully, $5000 subsidy.
However, for five months last year he was self-employed.
It was his intention that when this tax year was finalised he would make a 2 per cent contribution, in a lump sum, to his KiwiSaver scheme.
However, as it has not yet been finalised he is currently looking at a five-month contributions 'black hole'.
We have contacted everyone from KiwiSaver, ASB and Housing New Zealand to no avail - no one can give us an answer as to which is the best way to proceed.
He is quite happy to do a lump sum deposit now, based on his estimated end of year income, but is still not sure if that will meet the contributions threshold for Housing New Zealand.
We have 10 days to meet the finance conditions for our mortgage and are yet to get a straight answer as to what his entitlement from the deposit subsidy will be, or how to proceed to get the maximum entitlement.
Can you help? Surely there are other people who are self-employed, there must be an answer to this problem.

When submitting their application, all applicants for the deposit subsidy must provide confirmation of their income earned in the last 12 months, so that Housing New Zealand can assess the income against the eligibility criteria.

Therefore, your partner will need to provide Housing New Zealand with documents to validate what he has earned in the previous 12 months - in this case this could be done by a certificate of earnings from the IRD website and a copy of interim accounts for the self-employed period. Providing the IRD certificate alone would be insufficient, as this will not identify any self-employed earnings.

Based on what he has provided to certify his earnings in the last 12 months, he could then pay 2 per cent of the amount identified in the interim accounts, provided the period of self-employment was pre-April 2013, when the minimum contribution was increased to 3 per cent.

However, Housing New Zealand would not recommend he does before his application is processed and he has certainty that his lump sum is sufficient to get him to the $5000 subsidy level.

It is important to note that the subsidy is not based on how long you have been a member of KiwiSaver, but how long you have contributed the minimum percentage of your total income to your savings account.

Therefore, in this case, while he joined KiwiSaver in May 2008, much will depend on when his first contribution was received by IRD.

•Housing New Zealand spokesman.

•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,

- 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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