Even on low wages, it mounts up

I have three children and been at home looking after them for the past six years. I've been offered a part-time job that pays the minimum wage, so not big money, but it will work really well around their school and day-care hours. I have never been in KiwiSaver but I will get signed up through this new job. Can I opt out? I don't want my money taken off me and put in an account where I can't spend it until I'm 65. I can probably save just as much into a bank account. Are there any good reasons why I shouldn't opt out?

Congratulations on finding part-time work to fit in with caring for your children. All eligible new employees are signed up to KiwiSaver when they start work.

If you want to opt out, you can do so after you have been in the job for at least two weeks, and you have until week eight to do so. This is to give you some time to see what impact it has on your budget, and is also designed to encourage participation by inertia - people prefer the "do nothing" option so many workers have found themselves contributing to KiwiSaver because they never got round to filling in the opt-out form.

Have you worked out just how much of your pay will be deducted for KiwiSaver? If you earn $300 gross a week, at 3per cent your KiwiSaver deductions will amount to $9 a week. Can you afford this? If you decide you can, then you will also get contributions from your employer - and here's where it starts getting so much better than saving into a bank account.

Your employer has to add their 3per cent (after tax) to your contribution, so straight away you are getting a very generous return on your $9 investment.

Some workers have entered into an agreement with their employer for their total wage package include the employer's contribution, so they do not get 3per cent more than a worker who is not in KiwiSaver.

However, it is unlawful for an employer to expect an employee like you on the minimum wage to pay both the employee and employer KiwiSaver contribution.

This would be contrary to Section 6 of the Minimum Wage Act 1983, which states that every worker "shall be entitled to receive from his employer payment for his work at not less than the minimum rate".

The benefits of KiwiSaver do not end there. At the end of June each year your KiwiSaver provider will calculate how much you have contributed yourself, and put in a claim to the Government to top up your KiwiSaver account by 50c for every dollar you have contributed, up to a maximum of $521.43 per year.

These are called Member Tax Credits or MTC. As you are joining in April your entitlement for this year will be calculated pro rata depending on how many weeks you have been a member but, from July 1, you will be able to get the full entitlement, based on what you contribute.

Someone contributing $9 a week will get around $234 added to their KiwiSaver account each year.

As a part-time worker, to get more in MTC you can increase your contribution level to 4or 8per cent, if you can afford it.

This is a decision you may want to make once you have been working for a while, and worked out your budget.

According to the Sorted website, someone aged 35 earning $300 a week contributing 3per cent to KiwiSaver could have $121,000 saved by the time they are 65.

That's an impressive sum that most part-timers would struggle to save by themselves. You may think that 65 is a long way away but, when the day rolls around, I am sure you will be pleased to have the money.

- Shelley Hanna is an Authorised Financial Adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.