Stay on top of fund changes

It sounds like they are making more changes to KiwiSaver. This makes me nervous. What is the latest change and is it a good thing?

Many years ago American President Woodrow Wilson said, "If you want to make enemies, try to change something."

Some of the KiwiSaver changes we have seen have been for the benefit of the Government balance sheet (such as halving Member Tax Credits and scrapping the $1000 kickstart), while others have been for the benefit of members, for example increasing the amount members can withdraw for their first home.

The most recent change is the proposed scrapping of the income limits for KiwiSaver members applying for a HomeStart grant.

The grant gives $3000 to $5000 to eligible KiwiSaver members who have contributed to their fund for at least 3-5 years (they can get twice the amount if they are building a new home).

The process is managed by Housing New Zealand and is separate from a KiwiSaver First Home withdrawal.

Currently, only individuals earning less than $80,000 per annum or a couple earning less than $120,000 per annum are eligible for the grant.

Although the years of contribution do not have to be consecutive, some members have periods where they were not contributing and by the time they have contributed enough to qualify for the grant, their income may have gone over the threshold.

Many people also work overtime while saving towards a house, and this also pushes them over the threshold.

The HomeStart scheme came into effect on April 1, 2015 to replace the KiwiSaver First Home Deposit Subsidy.

Dr Nick Smith has released the first full year results of the HomeStart scheme, which showed it has helped 11,943 people into their first home with grants of $55.6 million. As it is a grant, the money does not have to be paid back.

"The Government is tweaking one aspect of the KiwiSaver home-buyer programme in response to feedback in respect of second-chance home owners," he said.

"The current scheme limits KiwiSaver withdrawals to first-home buyers and people who have previously owned property but have low assets and earnings. The income limits are being removed on July 1, 2016, meaning a second-chance homeowner whose assets are small will be able to access their KiwiSaver funds to buy a home regardless of how high their income is.

"This change will help many thousands of mid-life, middle-income New Zealanders who have been through a separation, or business failure, and are struggling to get back into home ownership by enabling them to access their KiwiSaver funds."

Dr Smith said HomeStart was part of a wider programme of work the government had under way to help more people into owning their own home, such as freeing up more land faster and initiatives to constrain building material costs and cut compliance costs.

This latest change does not help those members who were over the income threshold when they bought their first home and missed out on the grant.

Using KiwiSaver to buy your first home (or second chance) takes planning - something many people find difficult.

There is plenty of information and help available to members to learn more about the scheme.

Simply reading the information your fund manager sends you is one way to keep abreast of changes.

- Shelley Hanna is an Authorised Financial Adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.