QUESTION: Should everyone join KiwiSaver? I am 25 and earn $28,000 per annum. I am studying part-time and as soon as I have finished my studies in mid-2013 I'm heading to Australia. I already have other family there and I don't think I'll be coming back to New Zealand.
ANSWER: Most eligible New Zealanders have something to gain by joining KiwiSaver. In your case you will have three choices when you leave: Leave the money here; cash up some of it (after a waiting period); transfer the balance to your Australian account (once planned legislation has been enacted).
If you join up now your own contributions at 2 per cent will total $560 during 12 months, and your employer will top this up by around $462 (after ESCT tax). Then you will also get $280 in Member Tax Credits. Along with the $1000 "kick start" you should have a balance of around $2302 by mid-2013, of which you will only have contributed $560. If someone offered you $1742, would you say "no thank you"?
Currently those who emigrate permanently can apply for withdrawal of their KiwiSaver balance after 12 months, but they lose the Member Tax Credits.
If you leave your KiwiSaver funds in New Zealand until you reach the age of 65 (hard to imagine, but bear with me) at 4 per cent per annum your $2302 will grow to $11,051, or at 6 per cent to $23,677. That's a nice little nest egg for you in 40 years' time.
What is more likely to happen, is that you will transfer the balance of your KiwiSaver to your Australian super account. Superannuation in Australia is compulsory, and 9 per cent of every worker's income is paid into their super scheme. The New Zealand and Australian Governments have reached agreement on "portability of retirement savings". Our government completed the process in 2010 but we are still waiting for Australia to sign off on their final legislation. Many New Zealanders who have worked in Australia will be able to re-claim their "lost" super and transfer the funds to their KiwiSaver account.
At your age, you may want to feel unfettered by agreements, contracts and obligations. But no one can avoid these altogether and you need learn to identify and choose good ones (which may include a KiwiSaver account) and avoid bad ones (signing up expensive hire-purchase agreements). Joining KiwiSaver will also help you to build a savings habit, which should help you throughout your life.
Shelley Hanna is an authorised financial adviser FSP12241. Her disclosure statement is available on request and free by calling 8703838. The information contained in this article is of a general nature and is not intended to provide specific or personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.