KiwiSaver or student loan?
AYour situation is a great example of how plans can change. But this does not mean you made the wrong decision to contribute more into KiwiSaver instead of repaying your student loan. We often don’t know how events are going to unfold, but any plan is better than no plan and don’t waste your energy on regrets.
You have saved 8 per cent of incur interest at 5.3 per cent per annum on your student loan, starting from the day after you leave New Zealand. As you owe less than $15,000, your minimum repayment obligation will be $1000 per year (the amount increases depending on the size of the loan) at the end of March and September each year.
Inland Revenue provides overseas borrowers with a range of payment options on their website, such as automatic payments, internet banking, credit card or foreign cheque.
You must let Inland Revenue know about your plans — the easiest way is online through the myIR login.
It is important that you keep up with the minimum repayments, as late payment interest is charged on the unpaid amount. Inland Revenue is happy to help borrowers set up a repayment plan that works for them, so keep them informed. It may be a good idea to leave $500 in your New Zealand bank account for your first six-monthly repayment, in case you don’t find work in the UK straight away.
You should let your fund manager know when you are no longer a New Zealand tax resident. You do not need to make any payments into your KiwiSaver while you are overseas and you will not be entitled to Member Tax Credits. If you think you will withdraw funds on your return to buy a house, do not be tempted to leave your savings in a high risk fund — a balanced fund is more suitable than an aggressive or growth fund if your investment timeframe is less than five years.
If you decide to stay in the UK permanently, you can apply for a permanent emigration withdrawal. KiwiSaver members in this situation can apply to withdraw the kickstart, employer and employee contributions but no Member Tax Credits. ■ Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.