Joining KiwiSaver is a sensible decision for most eligible people between the ages of 18 and 65. There are currently around 2.4 million KiwiSaver members of whom around 360,000 (just under 15%) are under the age of 18. Clearly, many parents, or in some cases grandparents, have signed their children up for KiwiSaver. There are differing points of view as to whether this is a good thing for family members to do.
On joining, a child receives the Government ‘kickstart’ of $1,000. Children under the age of 18 do not receive the annual tax credit of up to $521, and, once enrolled, cannot opt out. If they are employed, they must contribute a minimum of 3% of their pay, yet employers are not required to make contributions. If they are not employed, they, or their parents, can make voluntary contributions to KiwiSaver at any time, however the funds will be locked in until retirement age unless the member is buying a first home, emigrating, or suffering financial hardship or serious illness.
The advantages of signing a child up for KiwiSaver are that they receive the $1,000 kickstart and parents or grandparents can contribute to the fund in the knowledge that the child is unable to withdraw the funds unless eligible to do so. The disadvantages are that the child cannot opt out of KiwiSaver later in life and must make contributions to KiwiSaver when employed unless a contributions holiday is requested. For students and those on low incomes this may not be a desirable outcome. It can be argued that a child, on reaching the age of 18 and being entitled to the full benefits of KiwiSaver, should decide for themselves whether they wish to join rather than having that decision thrust upon them by well-meaning relatives at an earlier age.