KiwiSaver skeptics will no doubt be saying ‘I told you so’ after the recent changes announced in the budget. A minority of the population have refused to join KiwiSaver on the grounds that the Government will keep changing the rules or mismanage their money. Yes, the rules have changed, but joining KiwiSaver is still a great idea and the skeptics are missing out on an opportunity to increase their wealth.
Under the current rules, KiwiSavers are required to contribute a minimum of 2% of their gross pay and this is matched by an employer contribution of 2% from which no tax is deducted. There is a $1,000 ‘kickstart’ payment from the Government as well as a matched tax credit of up to $1,040 per annum, paid each July. The new rules leave the $1,000 kickstart unchanged. From 1 April next year, the employer contribution will have tax deducted, so less will be paid into your KiwiSaver fund. From 1 July this year, the Government tax credit will be cut in half to around $520 per annum (paid in July 2012) and from 1 April, 2013 the minimum employee and employer contributions will be 3% of gross pay. Whereas previously the average wage earner’s contribution was tripled with the employer and Government contributions, now it will be roughly doubled, but that is still a good deal! If you haven’t joined already, joining sooner rather than later will let you take advantage of the old rules before they change. Self employed KiwiSavers Self employed KiwiSavers will still have to contribute $1,040 per annum to get the maximum tax credit of $520 as the credit will be paid at the rate of 50c per $1 contributed. Existing KiwiSaver members should ensure that their chosen fund is appropriate for their needs by obtaining advice from an Authorised Financial Adviser.