KiwiSaver for Brits
When you start working in New Zealand, you will be offered the opportunity to join KiwiSaver. KiwiSaver is a voluntary work-based savings initiative designed to encourage New Zealanders to save for their retirement.
You are eligible to join KiwiSaver if you are a New Zealand citizen or permanent resident aged under 65 - migrants on work or other temporary permits are not eligible to join.
Employee KiwiSaver Contributions:
Employers deduct 2% (or more if you like)
of your pre-tax pay, and deposit it into your KiwiSaver account, which can be
held via one of a number of fund managers - either your employer's preferred
scheme or one of your own choosing. You can only have one KiwiSaver account at
any time.
Employer KiwiSaver Contributions:
Employers also make matching
contributions of 2% to employee's KiwiSaver accounts.
Government KiwiSaver Contributions:
Each new KiwiSaver account is credited
with a $1000 tax-free contribution from the government, and scheme members are
also entitled to a tax credit of up to $20 per week (or up to $1040 per year).
This is added directly to your KiwiSaver fund.
New Zealanders aged 18-65 who are not
currently working can also contribute to a KiwiSaver scheme. They are eligible
to receive the tax credits and the $1000 kick-start sum. To receive the full
tax credit you must be contributing at least $20 a week to your scheme. You
cannot join KiwiSaver if you are over 65.
Children under 18 can join KiwiSaver and
receive the $1000 kick-start, but not the tax credit. Some schemes allow
children to make one contribution at the start but do not require further
instalments.
Once you have been contributing to
KiwiSaver for one year, you can take indefinite "contributions holidays", but
you will not continue to receive the tax credits while you are not contributing
to your scheme. Your employer is not obliged to contribute to your KiwiSaver
scheme if you aren't.
KiwiSaver Fund Access
Most people will not be able to access
the funds held in KiwiSaver until they qualify for New Zealand Superannuation
(currently age 65), except in special circumstances such as moving overseas
permanently or significant financial hardship. You are not taxed on
withdrawals. One year after you leave New Zealand permanently you can withdraw
your $1000 kick start, your contributions and your employer contributions but
you cannot withdraw the tax credits, which are returned to the government.
One-off withdrawals are allowed to help
scheme members buy their first homes once they have been contributing to
KiwiSaver for three years. First-home buyers who have been contributing to KiwiSaver
for three years are also eligible for a subsidy, but this is subject to caps
both on income and the purchase price of the house.
Your “nominated persons” can have quick access to up to $15,000 from your KiwiSaver account when you die, without having to wait for probate. Any other funds left in your KiwiSaver account when you die pass to your estate.
KiwiSaver and New Zealand Tax
Your contributions to KiwiSaver are
calculated from your gross (pre-tax) salary. You pay income tax on the portion
of your salary that you contribute to your KiwiSaver scheme.
Once you qualify for New Zealand
Superannuation (currently at age 65), you can take your KiwiSaver fund as a
lump sum with no further income tax to pay.
KiwiSaver funds are PIEs - Portfolio
Investment Entities. PIEs are special investment funds that are especially
tax-efficient for high-income earners. KiwiSaver funds are currently taxed at 19.5%
or 30% on their investment earnings - the tax is calculated and paid by your
KiwiSaver fund manager at a rate determined by your income. KiwiSaver funds are
not taxed on capital gains.
Moves are afoot to align KiwiSaver tax
rates with income tax rates, so from April 2010 you will be taxed at between
12.5% and 30% on the investment earnings in your KiwiSaver fund. This will
benefit lower income earners, and higher income earners continue to benefit
from paying 30% tax on their KiwiSaver rather than their income tax rate of 38%.
Keeping Track of your KiwiSaver
You'll get regular updates on your
KiwiSaver from your fund manager. You can also track your KiwiSaver
transactions via the "Manage My KiwiSaver" facility on the KiwiSaver website, www.kiwisaver.govt.nz.
UK Pensions and KiwiSaver
A number of KiwiSaver schemes have QROPS approved status, and can accept pension transfers from UK pension
providers. Please note that KiwiSaver schemes are far more restrictive than
other NZ pension schemes, both in terms of when you can access the money and
what you can invest it in. We would not normally recommend that a UK migrant
lock their transferred pension funds into a KiwiSaver scheme.
Australian Superannuation and KiwiSaver
If you have worked in Australia at any
time over the past 20 years or so, you may have an Australian pension. The NZ
and Australian governments have announced that you will be able to transfer
Australian pensions into New Zealand KiwiSaver schemes from next year (2010),
providing your KiwiSaver scheme is happy to accept the transfer.
Australian employers are required to pay
a generous 9% contribution to employee superannuation funds. You often start a
new scheme when you change jobs, so it is easy to lose track of Australian
pensions - if you think this may have happened to you, try tracing them via the
Super
Seeker facility on the ATO website.
At this early stage in negotiations
between and New Zealand and Australian governments, from what we
understand there are benefits and drawbacks to transferring your
Aussie Super to New Zealand if you're planning to retire in New
Zealand. The obvious benefit of course is that you can consolidate
your pensions, which makes them much easier to keep track of.
However, Australian pension funds
transferred into a KiwiSaver will be kept separate and you won't be
able to withdraw them for the first home buyers scheme. It appears
that the requirements for fund access of the Australian portion of
your KiwiSaver will be similar to what they would have been if you
had left them in Australia, with the earliest access possible at age
60 providing you have permanently retired, otherwise access at age
65. There are also tax considerations - Australian pension funds
pay less tax than KiwiSaver funds on their investment earnings.
Is KiwiSaver Right for You?
With contributions coming from your
employer, you and the government, and the opportunity of investment growth, it
is surprising how even quite modest contributions to your KiwiSaver scheme add up. Even if you are not
entirely sure whether you'll be retiring in New Zealand, the relative
portability of your KiwiSaver (and the opportunity to keep your employer's
contributions) make it a good option for most eligible migrants. We think that it
is well worth considering opening a KiwiSaver account.
There are a number of KiwiSaver providers, most
of whom offer "growth" and "conservative" KiwiSaver funds. Please contact us
for more information on choosing the right KiwiSaver scheme for you.
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