Shelley Hanna answers your KiwiSaver questions

The main financial advantage of joining KiwiSaver for the self-employed lies with the government top ups. Photo / Getty Images

Q I am now a permanent resident so I can join KiwiSaver — but is it worth me joining? I am self-employed and will be 58 in December. How long do you have to save for and would I get any worthwhile return?

A Well done on noting the fact that your residence status allows you to join KiwiSaver. The exact wording is "entitled to live in New Zealand indefinitely". This has the side-effect of entitling any Australian citizen who comes to New Zealand to work to join up straight away. Most foreigners need to apply for and be granted permanent residence before they can join KiwiSaver.

The main financial advantage of joining KiwiSaver for the self-employed lies with the government top ups. As you are nearly 58 you will be able to save into KiwiSaver for the next seven years, to age 65, before your entitlement to the annual government contribution finishes (and your savings are unlocked). If you save $7300 over the next seven years ($1042.86 per year or $87 per month) you will receive $3650 from the Government. This assumes that the current annual rate of $521.43 in government contributions continues for the next seven years.

Putting away $7300 over seven years and getting back $10,950 (plus any investment returns) looks like a pretty good investment. If you add a modest annual net return of 3 per cent you will have around $11,990 after seven years. Doubling your net return to 6 per cent per annum will give you $13,130 after seven years. In the early days returns don't make a huge difference — the most important thing is to get started.

Is there an alternative to KiwiSaver? If you saved $1042.86 per year into a bank account earning 1 per cent after tax you would have just $7522 after seven years.

Self-employed people often procrastinate about joining KiwiSaver. You have to choose a KiwiSaver Scheme and set up regular contributions to suit your cashflow. There are dozens of providers and schemes. Useful online tools like Sorted Fundfinder can help you choose. Many self-employed people put away at least $87 per month to ensure that they get all available government contributions. Some pay $1042.86 into their account in June each year, but this does not give them "dollar cost averaging" (potentially higher returns with the rise and fall of the unit price from month to month). Or they may forget to make the payment and miss out on the government contribution for that year altogether.

Candidly, for someone in your position, joining any scheme is better than not joining at all. For some people, the easiest way to join KiwiSaver is through their bank. The downside is that you will not get a choice as they can only offer you their bank scheme. Alternatively, contact a financial adviser who deals with KiwiSaver. They can give you personalised advice on KiwiSaver and can talk you through the features and merits of different schemes.

Every week you delay signing up will cost you $10 from the Government. Once you join up and begin receiving statements and newsletters from your fund manager, you can compare your scheme with others and switch at any time.

• •Shelley Hanna is the communications manager with Peak Portfolio Management Ltd which is a Financial Advice Provider licensed by the Financial Markets Authority. Disclosure information is available at www.peak.net.nz or call 06 8703838. The information provided in this article is of a general nature and should not be relied on as a recommendation to invest in a financial product. Send your KiwiSaver questions to shelley.hanna@peak.net.nz