KiwiSaver

Kiwi Saver has been going for 2 years, and people still don’t know what it’s all about!
Having arrived back in New Zealand on 26th February 2009, after having left on 26th July 2007, I was surprised to find out that not everyone is signed up to the Governments Kiwi Saver scheme!
Perhaps the Government should be more vocal about the fact that they are giving away cash to put in your retirement fund!
Why wouldn’t everyone under the age of 65 want the $1,000 that the Government wants to give you? There is a $1,000 with your name on it waiting for you to apply, as long as you are not a member already! It’s really very easy.
If you are under 18 or self employed then you don’t even have to contribute. However if you are over 18 then it’s in your interests to do so, because the Government will match your weekly contributions up to $20. What’s $20 these days, three beers on a Friday night, breakfast at a hotel in town, a couple of magazines and a paper, or possibly a taxi home?
Investors may end up with nearly three times what you have put in i.e. that is the $1,000 start up, your $20 a week ($1,040), and the Government matching $20 a week ($1,040), which is a total of $3,080 for a contribution of $1,040. Who knows of a better investment than that!
Under 18, then you will qualify for the start up of $1,000 only, but hey it’s $1,000 better than nothing at all!
As an employed person, and as long as you don’t opt out, you will become a member of kiwi-saver automatically. This is because your employer will ensure that you join. Your contributions will be 2% of your wages, for which your employer will match, also, with 2%. In addition you will receive the start up of $1,000, and the government will match your contributions up to $20. Therefore as an employed person who has not opted out, you may end up with nearly four times the amount you have put in being invested in the first year!
For each year afterwards, up until the age of 65, you will have three times the amount you have invested put into the scheme, because of the matching of the government and the 2% employers contribution. The difference being that you don’t get the $1,000 start up bonus after the first year.
So you see it really can be very beneficial to join Kiwi Saver! As a family we have all joined individually, and as there are four of us we are looking at the Government and employer contributions into our family pot of around $8,000 this year. Not bad as only one of us is employed, and contributes 2% of her wages, and another is self-employed putting in $20 a week!
Even if you are already a member it is worth looking at your Kiwi-Saver provider. If your contributions have been invested in a default provider then by law you they would have invested in a low-risk investment mix, consisting of at least 75% of cash and bonds. Although this investment strategy may suit a number of investors, it may not suit all.
Many employers don’t have preferred providers so your investment will automatically be applied to one of six default providers chosen by the Government. Ask your employer why they don’t have a preferred provider!
It’s a good idea for them to have one, because a number of employees don’t know which provider to use, and may ask an employer for advice. When this happens the employer generally states that it is up to the employee to make the decision. If no decision is made then the Government will allocate the contributions to one of the six providers, on a revolving basis.
The objections from people to saving in Kiwi Saver are really outweighed by the benefits that you can receive. The fact that the Government matches your investment up to $20 a week means that your contributions are doubled every year. Essentially this is a long term scheme which should allow you to have a pension in your old age, therefore there should be enough time to absorb any fluctuations in market conditions.
If you are in your 60’s under the age of 65, then it is still a good idea to join. The reason is because you get the Start up bonus of $1,000, and if you contribute you get the Government matching up to $20 a week. Starting at age 60, and retiring at 65 could give you a fund of around $11,000, whilst only contributing $5,000.
At the end of the day it is up to you. The onus is on you too to look after yourself in retirement, so why don’t you take something back from the Government. After all you have probably paid enough in taxes over the years!
To find out more information from the Government, go to the following independent website:-
http://www.kiwisaver.govt.nz/
Greg Ford is a distributor of Kiwi Savers. He can be contacted on 04-383-7756 or 027-733-3113