Kiwisaver: Under-18s miss employer contributions

Anyone under 18 can become a member of KiwiSaver and get the $1000 kick-start.

Companies not required to pay into savings funds of young workers but should deduct employees’ input.

My 15-year-old daughter has had a KiwiSaver policy since the system began and has just started working one day a week at a local hotel.
Despite completing all the relevant paperwork supplied by the company on starting work - IRD, KiwiSaver etc - they are not paying any KiwiSaver contributions for her, and neither is she.
On inquiring they have informed me that as she is under 18 they don't have to do this unless advised by IRD - is this correct?
I have been on to the IRD website to see how to inform them to notify the employer but it seems to me that the paper work should have come from her employer.
They have sorted out her PAYE all right! What can you advise that we do to ensure she starts contributing to her KiwiSaver?

Anyone under 18 can become a member of KiwiSaver and get the $1000 kick-start from the Government.

Children and teenagers won't get the member tax credit, worth up to $521.43, until their 18th birthday so unlike adults there isn't the added incentive to make regular contributions.

But many, like your daughter, will have casual or part-time jobs so what are they entitled to there?

I asked Joe Bishop, head of retail and marketing at Gareth Morgan Investments, which manages the Kiwi Wealth KiwiSaver Scheme, to explain how the contribution rules apply to the under-18s.

"If you are a KiwiSaver member under the age of 65 earning salary or wages from which PAYE is deducted, then your employer must deduct KiwiSaver contributions from your pay and pass them on to Inland Revenue.

"The only difference for KiwiSaver members under the age of 18 is that their employer is not required to make compulsory employer contributions to KiwiSaver.

"So while your daughter's employer is not required to make employer contributions, they certainly should be deducting her employee contributions.

"The only exception would be if your daughter is on a contributions holiday from KiwiSaver.

"In this case her employer is not required to make deductions from her pay and send them to Inland Revenue while the holiday is in effect.

"Your best course of action is to download a copy of the KiwiSaver deduction form (KS 2) from the Inland Revenue website, get your daughter to complete it and provide it to her employer.

"They don't need to send this form to Inland Revenue but they do need to make deductions at the rate shown on the form.

"However, those missing KiwiSaver contributions may show up in your daughter's KiwiSaver account after all, whether her employer has passed them on or not.

"The Inland Revenue for employers guide (KS 4) states: 'Inland Revenue is required to pass on member contributions received - or which should be received from an employer - to the employee's scheme provider.

"'We'll make the payment regardless of whether or not we have received the contributions.

"'If we do not receive the contributions, we'll seek to recover the arrears from you [the employer] in the same way we would recover unpaid PAYE tax debts.'

"What may have caused confusion on the employer's part is that before April 1, 2013 there was a child tax rebate for the first $2340 of income from employment for under-18s.

"This meant that many children who had jobs after school etc were not required to have PAYE taken out of their pay, and therefore they were not required to contribute to KiwiSaver.

"This has now changed," says Bishop.

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, helentwose@gmail.com. Sorry, but Helen cannot answer all questions, correspond directly with readers, or give financial advice.