KEY POINTS:
Reports of delays in employer contributions coming into KiwiSaver schemes has some questioning whether money is being lost in the system.
Matt Baker, associate director in the tax department of Staples Rodway, which runs a KiwiSaver scheme, says the irregularity of contributions coming from the tax department mean
it is a major challenge for providers to reconcile KiwiSaver accounts.
Baker reckons almost half of the employer contributions coming in since January have not yet made it to his scheme and since the compulsory employer contribution started in April the problem has worsened.
"It's the result of double the number of people joining than what they expected. The IRD have been overwhelmed by the sheer number.
"The result has been effectively lost money. But they say it will balance over time."
He is hoping it will all be sorted by the end of this year but in the meantime he recommends people sign up to the Inland Revenue's account balance service to check how much money is getting to the IRD and if there is a problem to talk to their employer about sorting it out.
However Inland Revenue says there are no delays that it is aware of in regards to employer contributions and people should be aware that it takes time to process payments.
Inland Revenue collects contributions for KiwiSaver members via the Employer Monthly Schedule, a system which has been in place for several years. This schedule is lodged with Inland Revenue either twice monthly or monthly for the payment of PAYE and now KiwiSaver contributions.
These are lodged a month in arrears, so there is always a time lag between the contribution being deducted from salary or wages by the employer, and then passed to Inland Revenue for processing, and then on to the scheme provider for investment for the KiwiSaver member.
You can sign up to get the account balance service with the IRD on www.kiwisaver.govt.nz.
FAIR PLAY
Moves by the Government to stop employers from paying those who join KiwiSaver less than their colleagues have been welcomed by some, but others say the changes will introduce even more headaches for bosses.
Labour Minister Trevor Mallard has announced plans to amend the Employment Relations Act to make it illegal for employers to offer lesser terms and conditions to KiwiSaver members.
Mallard had become concerned following a number of employers who had docked the pay of staff members by using their money to pay for the employer contributions to KiwiSaver while pocketing the $20 tax credit given to employers by the Government.
Michael Chamberlain, principal of KiwiSaver provider Aventine, says he agrees with the minister that reducing the pay of employees who join KiwiSaver to cover the employer contribution is against the spirit of KiwiSaver but the changes may cause even more problems.
"I have real concerns that the proposals announced by the minister may lead to major complications and unintended consequences with managing employment relations and remuneration strategies.
"I believe the changes will penalise the good employers by the imposition of additional compliance and system costs."
Chamberlain says the Government should allow employers to go ahead with building KiwiSaver into total remuneration packages but should focus on stopping employers that have docked the pay of their staff to cover KiwiSaver contributions.
He says if the minister proceeds with the changes the worst case scenario is that costs to employers will increase significantly while those who can't afford to join KiwiSaver may be discriminated against because those who can join have to be paid 4 per cent more.
"I am concerned the minister is using the proverbial sledgehammer to crack a nut."
Staples Rodway associate director Matt Baker says the new policy will completely contradict legislation brought in by the Government in December allowing employers to offer staff a total remuneration package.
"As long as the agreement was entered into on or after 13 December 2008, and the agreement was negotiated in good faith, this was entirely lawful.
"In fact the legislation was passed specifically to allow this option, via amendments to the KiwiSaver Act."
He says if Mallard's proposed changes go ahead there will be a clear conflict between the Employment Relations Act and the KiwiSaver Act.
A date has yet to be set on when the act will be amended in Parliament.
SAVERS FEEL PINCH
Finance Minister Michael Cullen takes the opportunity to trumpet the growing numbers of people joining KiwiSaver at every opportunity he gets.
At a function last week he slipped in a line about KiwiSaver numbers reaching nearly 770,000 and just a few weeks ago he told a room full of bean-counters he believed the number joining could top one million by the time the election comes around.
But what Cullen doesn't mention is that some people are also being forced to pull out of the Government's savings scheme because of tougher times and higher living costs.
Figures for the first year of KiwiSaver show 3506 people have had to take a contribution holiday because of financial hardship.
Sure, that's just a small number compared to the total but now that KiwiSaver has been around for a year predictions are that more people will join them.
Only those who can prove they are under financial hardship are allowed to opt out after being in the scheme for less than a year.
But after a year in KiwiSaver anyone can opt out for up to five years - renewable as many times as they like.
The Retirement Commission has already been fielding questions from people worried about how they can afford to stay in KiwiSaver and has recently updated its www.sorted.org.nz website to answer questions like "Can I still afford KiwiSaver?" and "Should I change schemes?"
TAX CREDITS COMING
Those waiting to see when their $1043 Government tax credits will hit their KiwiSaver accounts can be assured it could be anytime now.
According to Inland Revenue KiwiSaver scheme providers will apply for the tax credits on your behalf and can do so from July 1 onwards. The IRD then has 30 days to process the application.
Those who contribute at least $20 per week are eligible for the tax credit, up to $1043 per year.
CROSSING THE DITCH
Those thinking of moving across to Australia will be glad to know the Government is happy for you to take your retirement savings with you.
Officials from both countries are expected to finalise a deal by the end of October that will allow New Zealanders to take their retirement savings - including KiwiSaver - with them when moving across the Tasman and vice versa. The basic framework has been agreed to but the details still have to be worked out.
