KiwiSaver Changes you need to know
From April 1, 2019 KiwiSaver is making changes to help New Zealanders satisfy their retirement saving needs. We breakdown what these changes are, and how you may be impacted.
1. Additional Contribution RatesIn addition to the existing 3%, 4% and 8% rates, KiwiSaver members now have the option to contribute 6% and 10% of their salary/wages to their KiwiSaver fund. The idea is that the new contribution rates give New Zealand KiwiSaver members more flexibility and control over their savings. In a basic sense, the gap between 4% and 8% is relatively large, therefore a 6% option is fitting. Likewise, the addition of a 10% contribution rate appeals to those who want to save more for their retirement. In percentage terms, the new figures do not seem overwhelming. But take a moment to think about the impact of raising your contribution to one of the new rates. The result could mean hundreds, more likely thousands of dollars, that is added to your retirement fund by the time you reach retirement age. This presents a very appealing set of options for all KiwiSaver members – whether you are aiming to build a fund for retirement, or if you are aiming to utilise your KiwiSaver fund as part of your first home package. The fact is, you can make a notable difference to your retirement fund with small increases in contributions now. The scheme is designed to reward the long-time, savvy saver. KiwiSaver members can still adjust their contribution figure by informing their employer and with the new rates presented, this will no doubt appeal to many New Zealand KiwiSaver members. The term ‘Contribution Holiday’ has now been renamed ‘Saving Suspension’. Besides, a change in phrase, which negates the positive connection of a ‘holiday’, the real change is the maximum period for a savings suspension/holiday/hold/break which has been reduced from five years to one year.
2. ‘Saving Suspension’KiwiSaver members can now take a ‘Saving Suspension’ for one year, maximum. However, this suspension can be renewed at the end of each ‘saving suspension’ period. For KiwiSaver members a ‘Saving Suspension’ impacts long term savings in a number of ways. For a start member accounts will not grow by way of contributing, plus a saving suspension means the KiwiSaver member will miss out on employer and government contributions. It is worth noting that existing savings suspensions of over one year will retain their original end date.
3. ‘Member Tax Credit’ renamedThe MTC has been renamed as ‘Government Contribution’. The name change reflects what the contribution actually is – removing any connotations and possible confusion surrounding tax implications. From 1 July 2019 two further changes to how KiwiSaver is operated and managed will be implemented;
1. Over 65’s allowed to opt-in to KiwiSaverAllowing over 65’s to opt-in to KiwiSaver provides an opportunity for those who missed out initially or closed their accounts and now want to return, to invest in KiwiSaver. It is worth noting that people joining over 65, will not receive any government or compulsory employer contributions.
2. Five-Year Lock-in period removedThe five-year lock-in period for individuals who opt into KiwiSaver and were aged 60+ will be removed from 1 July, 2019. This enables members who join KiwiSaver after the age of 60 (and have not been a member for five years when they qualify for NZ Super) to access their funds at age 65.