Over-65s big winners in KiwiSaver tweaks
More changes have been enacted to KiwiSaver, creating more flexibility.
People over 65 can join
The passage of the the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill means that people who are past pension age can now opt in to KiwiSaver for the first time, or move to a new scheme.
At the moment they can remain in a scheme only if they were already a member before they turned 65.
That creates another investment option for this age group, because KiwiSaver fund fees tend to be lower than other managed funds’. If members are aged over 65, their money is not locked in.
Being able to move to another scheme also means they can shift to one with lower fees or to one that provides an easier way to manage withdrawals in retirement.
Acting Retirement Commissioner Peter Cordtz said it was a good move.
‘‘Following the 2016 Review of Retirement Income Policy the Retirement Commissioner recommended that allowing entry to KiwiSaver to people over 65 would remove a policy inequity, provide another investment option for this age group, and allow employers to voluntarily make contributions for all employees over 65,’’ he said.
‘‘There is no apparent reason for those over 65 not being able to join KiwiSaver.’’
Contributing to the accounts of employees who are 65 or older remains voluntary for employers.
No lock-in for older members
People who join KiwiSaver aged 60 or older have had to wait five years to touch their money.
That will no longer be the case. Money will be available for access at 65, no matter when a member joined.
These two changes take effect July 1.
New contribution rates
At present, you can choose to automatically contribute 3 per cent, 4 per cent or 8 per cent of your pay.
From April 1, you will also have the option of 6 per cent and 10 per cent.
‘‘Adding more contribution rates gives members more flexibility and control over their saving,’’ Cordtz said.
‘‘We’ve had many New Zealanders tell us that the gap between 4 per cent and 8 per cent is too large for those able to contribute more, so they feel stuck on the lower rates. Others want the ability to save even more for their retirement.’’
Almost a quarter of KiwiSaver members contribute at 4 per cent but only 9 per cent put in 8 per cent of their pay.
‘Holiday’ renamed
You will no longer take a contribution holiday – instead you’ll have a savings suspension.
This is designed to remind members that they are not contributing to their retirement savings accounts – and sounds less appealing than a ‘‘holiday’’.
Bigger balances
KiwiSaver balances have shot up over the past three years.
The median value in June 2018 was $13,000 – $5000 or 62 per cent more than 2015.
The increase was made up of employee and employer contributions, and any investment gains or other contributions.
Men have higher median KiwiSaver values than women across all age groups, except for people aged 15 to 24, where both men and women had a median scheme value of $3000.
For men and women aged 55 to 64 years, the median values were $30,000 and $23,000, respectively.