KiwiSaver advice

[Hoon]

Yes you can BUTyou need to be making payments for xxx amount of time before you can take a holiday.

Ahh I had a look and you're right!

After you've been contributing to KiwiSaver for 12 months you can apply for a savings break, called a contributions holiday, of between three months and five years, or less than three months if your employer agrees.

There's no limit to the number of times you can take a contributions holiday. If you take one you can still make lump sum payments.

So the first year I will need to contribute 4%.

I also found out that if you contribute less than your employer you will be taxed at 33% on the difference where as if you meet it you will be exempt so yet another dis-incentive.

Doing the math again:

Year	Me	Govt	Employer	Total Contributions for year
2008	$2400	$1042	$600		$5042 (incl $1000 Govt kick-start)
2009	$1042	$1042	$1200-$52.14	$3231.86
2010	$1042	$1042	$1800-$250.14	$3633.86
2011	$1042	$1042	$2400-$448.14	$4035.86

So this shows by skimping out and only paying $1042 instead of $2400 p/a, I will actually lose $448.14 to tax in the 4th year. Guess they got that one covered! Going by that I will probably now pay the min for the 2nd and 3rd year. By then KiwiSaver and the legislation should all be settled so I'll have a better idea whether to risk my $2400 p/a in it or stick with the minimum $1042.

[davereid]

Be cautious of kiwisaver.

1. The only money guaranteed long term is the Gmints tax rebate. Employer contributions will most likely be part of your salary package - so if they don't go into kiwisaver you can get them anyway.

2. Fees are massive - have a look at Gareth Morgans site.

3. Its all based on the age of retirement - they make a big play of the fact its currently 65. It could change, and even if you have saved enough to retire, you may be stuck working till you are 70-75 as you cant get you money.

4. Its not guaranteed... lots of overseas providers offer negative returns... but you still have to contribute !

5. The real killer... most of us are not the same age as our spouse. So if you choose to retire when you are 65, but your spouse is (say) 60 you can do that now. But if you and your spouse are in kiwisaver you cant.

You cant retire until the youngest partner is 65.

This is because the younger partners kiwisaver growth counts as income, as your pension will be abated at 0.70c in the dollar for every dollar of income it makes. (over $80 gross a week.) But it's money you can't spend, thus effectively locking you out of the pension till the youngest partner is 65.

6. If you invest outside kiwisaver you can move the money to a trust, so you will still be eligible for rest home care, that hip operation etc.
But if you are in kiwisaver, the money arrives in you lap at 65.. too late to protect it from income and asset testing.

LOTS OF WAYS IN.... BAIT... NO WAY OUT... Looks like a trap !

[Oakie]

2. Fees are massive - have a look at Gareth Morgans site.

I wouldn't say 'massive' but their fee structure is higher than others in some cases because they are openly targeting serious investors. If you're the sort of saver who puts in the minimum and takes contribution holidays then Gareth Morgan is not for you. For example, their minimum annual fee two years from now will probably be $200 (according to their prospectus). If you've only saved $5000 that's 4% in gone in fees per year. If however you've stashed away $20000 that's only 1% in fees.

Have a look here to compare 1st year fees between different companies http://www.consumersaver.org.nz/pages/calcform

[Winston001]

Check out Gareth Morgan's calculator for fees http://forms.gmk.co.nz/calculators/providerfees.aspx

Also I think Morgan has reduced the annual fee to $100 recently. The whole Kiwisaver concept is a work in progress.

However it is important to take into account the fees charged by the managers. This will make a big long term difference.

So far as I know the fees of the Aussie super scheme are a lot lower than the NZ companies charge for Kiwisaver. The Aussie scheme looks to be a real winner for the average Aussie.

[Oakie]

Fees seem to go between .7% to about 1.7%. I guess even at 2% that's the same as me giving someone $1000 to invest for me and then letting them take $20 of that for their trouble. Seems pretty reasonable to me!

[The Pastor]

only concern is that you prob will miss out on a raise and the the goverment might change in 45 years (when i can actually claim) and take the money and run. They legally can take all the money in kiwisaver, not just there bit.

[Oakie]

They legally can take all the money in kiwisaver, not just there bit.

No they can't. Most of the money going into KiwiSaver is from you and your employer (eventually). It goes to a private investment company/bank or whatever sort of provider and the account is in your name. The government cannot access those funds anymore than they can access funds people had put into their super funds before KiwiSaver.

The only KiwiSaver money that the Gov't can get is employee contributions that can be used to offset an IRD debt, and that is only at the request of the taxpayer.

[cynna]

5. The real killer... most of us are not the same age as our spouse. So if you choose to retire when you are 65, but your spouse is (say) 60 you can do that now. But if you and your spouse are in kiwisaver you cant.

You cant retire until the youngest partner is 65.

This is because the younger partners kiwisaver growth counts as income, as your pension will be abated at 0.70c in the dollar for every dollar of income it makes. (over $80 gross a week.) But it's money you can't spend, thus effectively locking you out of the pension till the youngest partner is 65. !

havent heard of that one before. im 33 and my partner is 24 - so i will be locked out of the pension for 9 years!!!!! if she is still working when im 65 is my pension still abated in the same way? although i suppose her pay is money we can spend. i guess i would have been locked out of the pension anyway is she is earning enough

might have to trade her in for an older model

how much is the pension anyway

the more i look into kiwisaver the more i get confused. i might stick with my current work scheme where i put in 5% and they put in 7.5% (taxed at 33%). i get this money when i leave the company but miss out on the $1000 start up payment and the $1024 tax credit

damn ive get a headache now.....

[Oakie]

5. The real killer... most of us are not the same age as our spouse. So if you choose to retire when you are 65, but your spouse is (say) 60 you can do that now. But if you and your spouse are in kiwisaver you cant.

You cant retire until the youngest partner is 65.

This is because the younger partners kiwisaver growth counts as income, as your pension will be abated at 0.70c in the dollar for every dollar of income it makes. (over $80 gross a week.) But it's money you can't spend, thus effectively locking you out of the pension till the youngest partner is 65.

If that was the case it would be happening already as all those people who currently have retired and have younger working partners would be in that situation. Haven't heard anyone complaining about it over the past 20 years so I can only assume that's not the case...
Oh and I rang the IRD KiwiSaver line (0800 549 472) and they confirmed that KiwiSaver growth is not treated as income for the purposes of NZ Super abatement.

[sweetp]

Hi Folks, I haven't seen anyone suggest the kiwisaver website or sorted.org.nz which will answer a lot of questions.

To throw in my 2 cents worth, the 6 defult schemes all had to pass some pretty vigous tests - including low fees in order to become the schemes the government supports. A number of them are through banks and therefore should offer more security.

Also one other thing to consider is salary sacrifice. This is when you elect to reduce your base salary in order for your employer to put this as "employer contributions" in your scheme. So if you choose to sacrifice 4% they will put this in as the contribution, it does need to reduce every year (and your salary increase) as the compulsary employer 1% kicks in (assuming that it makes it to legislation).

The advantage of this is tax - the amount is tax free, so you benifit by what you would have been taxed at e.g. 33 or 39%. Because KiwiSaver is free from SSWCT then the money is tax free. Obvious disadvantages are, cant access the money till retirement age and it is a little complex and some employers may not want to do it, but it is another way to get some benefit from KiwiSaver.....

[davereid]

I rang the IRD KiwiSaver line (0800 549 472) and they confirmed that KiwiSaver growth is not treated as income for the purposes of NZ Super abatement.

Hmm the government might want to sort its act on this, as I rang WINZ, and they said it would count.

But, even if it doesnt, its still a major problem for those who have a spouse who is younger.

Lets say you are 30, your wife is 20, and you are earning $50k.

At 65, you will have $285,000 saved (based on 8% and http://www.consumersaver.org.nz/pages/calcform)

What will your fees be ? About $3500 a year (http://forms.gmk.co.nz/calculators/p...ees.aspx?sec=2)

Not exactly insignificant !

But it gets better.

You now have this 280K in your lap. If the pension is means tested you are now rich and wont get it. If you need residential care, you are rich, and wont get it. If you want to gift it to your family you can - but any gift over $28k per year is heavily taxed. So you can't even share it with your family.

So you will either invest it, or have to spend it. Spending will work, and good on ya. (except maybe if your motivation was spending money you would have had more fun doing it when you were 40, not 70)

If you invest it, say at 10% before tax, you will earn $28k P.A. before tax. You will pay (at least) 19% income tax on this, and will be left with the change. But you will also be getting NZ super. Trouble is, NZ super is also taxed at 19%. And a 70% abatement scheme exists. So, for every $100 you earn over the threshold of $80, you will pay 19% tax and 70% abatement leaving you with err actually nothing.

So, you will be no richer than if you relied on NZ super. Actually you may be poorer !

But its too late to gift stuff to family. And they wont get F. all inheritance as your old age care will be funded from your kiwisaver.

And then theres the other traps.

Like you and her indoors, take advantage of your kiwisaver to buy your first home at 25. By 30, shes pissed off, taken half the loot and the dog. But you can't get another kiwisaver first loan. You somehow can't quite work out why she can... but now you are stuck with kiwisaver and a mortgage..

Just use your brain..

it has an easy way in
No way out
No real promises
and bait...