Friday 26 August 2011

What's the minimum for KiwiSaver?

QUESTION:     I am 35, on a modest salary with a mortgage.  I didn’t join KiwiSaver because 4% was too much.  Is it still 4%?

ANSWER:   No, it was lowered to 2% in April 2009 by the current National government.  When KiwiSaver was set up in 2007 many people, like you, decided that 4% was too much to contribute.  For a person earning say $39,000 4% amounted to $30 per week.  Now it’s half that, or $15 per week.  The percentage is based on your salary including bonuses and overtime. 

If you sign up for KiwiSaver your employer will also be required to contribute 2% to your Scheme (as you are over 18).  This cannot be deducted from your agreed salary package - it is on top of your usual remuneration.  If you start with 2% you can later increase this to 4% or 8%.  Your employer is not required to contribute more than 2% (from April 2013 this will go up to 3%).

On a salary of $39,000, at 2% you will contribute $780 over 12 months.  In order to get the full tax credit of $521 per year you must contribute $1042 per year yourself (not including any employer or government contributions).  KiwiSaver runs from 1 July to 30 June each year and the tax credits are based on your contributions over this period.  Although it is called a ‘tax credit’ that is something of a misnomer as it is actually real money from the government paid to your KiwiSaver account. 

You can top up your KiwiSaver - to get more in tax credits - by putting in a lump sum directly to your Scheme provider before the end of June next year.  Some Scheme providers write to their members in June suggesting that they top up their accounts and explaining how to go about it.

If you join before the end of this month (August) the tax credit will be calculated pro rata for the time that you have been a member (11 months).   So for every month that you delay joining you may miss out on those extra dollars from the government (up to $43 per month).  Not a fortune but it’s an extra incentive if you need one. 

Shelley Hanna is an authorised financial adviser FSP12241.  Her disclosure statement is available on request and free of charge 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.


As published in the Hawkes Bay Today 23 August 2011

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