Up to employer to check eligibility

I am a British citizen, currently in New Zealand in a new job on a working visa. I am hoping to settle here long term. I heard good things about KiwiSaver and I have decided to contribute 8 per cent from my salary, and look at transferring my UK pension funds as well. However, someone has told me that I should not be in KiwiSaver, as I don't have permanent residence yet. If I just keep contributing in the expectation that I will get permanent residence, what is the worst that can happen? Can I lose all the money I have contributed or do I get it back?

Your suspicions are correct - as long as you are here on a work permit you are not eligible to join KiwiSaver.

To join KiwiSaver, a person must be entitled to live in New Zealand indefinitely.

This includes New Zealand or Australian citizens, or those holding either a New Zealand or Australian residence permit, who are living here.

When a new member joins KiwiSaver via their employer it is the responsibility of the employer to determine their eligibility to be enrolled.

If a member opts in directly with a scheme provider then it is the scheme provider's responsibility to determine eligibility.

I asked Inland Revenue what would happen if a person enrolled in KiwiSaver and was later found to be ineligible.

A spokesperson replied: "If an invalid enrolment is determined then the KiwiSaver membership will be cancelled and any contributions made by the customer will be refunded to them.

Employer contributions will be returned to the employer and government contributions will be returned to the Crown. Inland Revenue see these cases from time to time and close the membership of the customer."

My IRD source went on to say that there is some flexibility around this: "If a customer has been enrolled into KiwiSaver while not entitled to live in New Zealand (eg. on a work permit/visa) they may still be eligible to be a member. Section 59 of the KiwiSaver Act states that a person's membership will be deemed valid if they: subsequently met the eligibility criteria when Inland Revenue first becomes aware of their invalid enrolment, or will meet the eligibility criteria within three months from when Inland Revenue first become aware of their invalid enrolment."

What about your UK pensions funds? The UK rules have been tightened, and since April 6, 2015, KiwiSaver members with UK pension funds can no longer to transfer them into their KiwiSaver account.

Only super funds that have "QROPS status" can accept transfers from UK pensions.

Transfers from UK pension schemes to non-QROPS schemes can trigger an unauthorised transfer tax of up to 55 per cent on the UK pension scheme amount.

Prior to April 2015 many KiwiSaver schemes had QROPS status, but this is no longer the case.

Part of the problem from the UK point of view is the ability of KiwiSaver members to apply to withdraw funds for first home purchases, permanent immigration or significant financial hardship.

Now the UK will only grant QROPS status to a scheme that does not allow withdrawals before the age of 55, except in the case of serious illness.

There are some NZ super schemes that do have QROPS status, so if and when you settle here permanently you can look into that.

Go to the website of the Financial Markets Authority for useful information on this topic.

- 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