KiwiSaver sceptics will no doubt be saying "I told you so" after the recent changes announced in the Budget. A minority of the population have refused to join KiwiSaver on the grounds that the Government will keep changing the rules or mismanage their money. Yes, the rules have changed, but
joining KiwiSaver is still a great idea and the sceptics are missing out on an opportunity to increase their wealth.
Under the current rules, KiwiSavers are required to contribute a minimum of 2 per cent of their gross pay and this is matched by an employer contribution of 2 per cent from which no tax is deducted. There is a $1000 "kickstart" payment from the Government, plus a matched tax credit of up to $1040 per annum, paid each July. The new rules leave the $1000 kickstart unchanged.
From April 1 next year, the employer contribution will have tax deducted, so less will be paid into your KiwiSaver fund.
From July 1 this year, the Government tax credit will be cut in half to around $520 per annum (paid in July 2012) and from April 1, 2013 the minimum employee and employer contributions will be 3 per cent of gross pay. Whereas previously the average wage earner's contribution was tripled with the employer and government contributions, now it will be roughly doubled, but that is still a good deal. If you haven't joined already, joining sooner rather than later will let you take advantage of the old rules before they change.
Self-employed KiwiSavers contributing directly to a scheme may want to consider dropping their contribution to $520 per annum to match the tax credit, with the approval of their scheme provider. Existing KiwiSaver members should ensure that their chosen fund is appropriate for their needs by obtaining advice from an authorised financial adviser.
Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847.
www.moneymaxcoach.com
